<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended JANUARY 31, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
.
COMMISSION FILE NUMBER 0-21180
INTUIT INC.
-----------
(Exact name of registrant as specified in its charter)
DELAWARE 77-0034661
-------- ----------
(State of incorporation (IRS employer identification no.)
2535 GARCIA AVENUE, MOUNTAIN VIEW, CA 94043
(Address of principal executive offices, including zip code)
(415) 944-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
46,515,147 shares of Common Stock, $.01 par value, as of February 28, 1997
<PAGE> 2
FORM 10-Q
INTUIT INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
NUMBER
ITEM 1: Financial Statements
Condensed Consolidated Balance Sheets as of
July 31, 1996 and January 31, 1997......................... 3
Condensed Consolidated Statements of Operations for
the three and six months ended January 31, 1996 and 1997... 4
Condensed Consolidated Statements of Cash Flows for
the six months ended January 31, 1996 and 1997............. 5
Notes to Condensed Consolidated Financial
Statements................................................. 6
ITEM 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 12
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings.............................................. 21
ITEM 4: Submission of Matters to a Vote of Security Holders............ 22
ITEM 6: Exhibits and Reports on Form 8-K............................... 23
Signatures..................................................... 24
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INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1996 1997
--------- -----------
(In thousands, except par value; unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................ $ 44,584 $ 104,859
Short-term investments ............................................... 153,434 170,974
Marketable securities ................................................ -- 179,550
Accounts receivable, net ............................................. 49,473 146,277
Inventories .......................................................... 4,448 4,428
Prepaid expenses ..................................................... 9,269 11,346
Deferred income taxes ................................................ 19,205 21,313
--------- ---------
Total current assets ......................................... 280,413 638,747
Property and equipment, net ............................................ 95,611 78,924
Purchased intangibles .................................................. 16,449 12,580
Goodwill ............................................................... 15,194 9,301
Long-term deferred income tax asset .................................... 6,892 6,892
Other assets ........................................................... 3,461 5,476
--------- ---------
Total assets ........................................................... $ 418,020 $ 751,920
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ..................................................... $ 33,972 $ 63,134
Accrued compensation and related liabilities ......................... 15,473 19,663
Deferred revenue ..................................................... 18,974 29,595
Income taxes payable ................................................. -- 32,518
Deferred income taxes ................................................ -- 44,990
Other accrued liabilities ............................................ 42,270 140,690
--------- ---------
Total current liabilities .................................... 110,689 330,590
Deferred income taxes .................................................. 2,513 2,707
Long-term notes payable ................................................ 5,583 5,080
Stockholders' equity:
Preferred stock, $0.01 par value
Authorized -- 3,000 shares
Issued and outstanding -- none ..................................... -- --
Common stock, $0.01 par value
Authorized -- 250,000 shares
Issued and outstanding -- 45,807 and 46,486 shares, respectively ... 458 465
Additional paid-in capital ........................................... 530,818 551,022
Unrealized loss on marketable securities ............................. -- (4,032)
Cumulative translation adjustment and other .......................... (502) (668)
Accumulated deficit .................................................. (231,539) (133,244)
--------- ---------
Total stockholders' equity ................................... 299,235 413,543
--------- ---------
Total liabilities and stockholders' equity ............................. $ 418,020 $ 751,920
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
1996 1997 1996 1997
--------- -------- --------- --------
<S> <C> <C> <C> <C>
(In thousands, except per share amounts; unaudited)
Net revenue .............................................. $ 218,996 $265,978 $ 321,246 $368,484
Costs and expenses:
Cost of goods sold:
Product ............................................. 49,241 58,621 76,657 85,666
Amortization of purchased software .................. 241 114 916 154
Customer service and technical support ................. 34,631 40,559 59,583 68,071
Selling and marketing .................................. 42,598 53,235 78,978 90,636
Research and development ............................... 18,042 22,930 38,193 45,391
General and administrative ............................. 9,945 10,718 19,998 22,624
Charge for purchased research and development .......... -- -- -- 4,929
Amortization of goodwill and purchased intangibles ..... 10,572 6,192 20,447 16,494
--------- -------- --------- --------
Total costs and expenses ....................... 165,270 192,369 294,772 333,965
--------- -------- --------- --------
Income from operations ......................... 53,726 73,609 26,474 34,519
Interest and other income and expense, net ............... 1,307 1,758 3,371 3,806
--------- -------- --------- --------
Income from continuing operations before income taxes .... 55,033 75,367 29,845 38,325
Income tax provision ..................................... 30,966 30,667 24,462 21,929
--------- -------- --------- --------
Income from continuing operations ........................ 24,067 44,700 5,383 16,396
Loss from operations of discontinued operations, net of
income tax benefits of $1,267 and $2,229, respectively .. (2,157) -- (3,795) --
Gain on sale of discontinued operations, net of income tax
provision of $52,617 ................................... -- 71,240 -- 71,240
--------- -------- --------- --------
Net income ............................................... $ 21,910 $115,940 $ 1,588 $ 87,636
========= ======== ========= ========
Income per share from continuing operations .............. $ 0.50 $ 0.94 $ 0.11 $ 0.35
Loss per share from discontinued operations .............. (0.04) -- (0.08) --
Income per share from sale of discontinued operations -- 1.50 -- 1.50
--------- -------- --------- --------
Net income per share ..................................... $ 0.46 $ 2.44 $ 0.03 $ 1.85
========= ======== ========= ========
Shares used in computing net income (loss) per share ..... 47,822 47,631 47,420 47,484
========= ======== ========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31,
1996 1997
--------- ---------
<S> <C> <C>
(In thousands, unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .......................................................... $ 1,588 $ 87,636
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Net gain on sale of discontinued operations .................... -- (71,240)
Loss from discontinued operations offset against gain .......... -- (9,668)
Charge for purchased research and development .................. -- 4,929
Amortization of goodwill and other purchased intangibles ....... 22,486 17,732
Depreciation ................................................... 10,207 15,974
Changes in assets and liabilities:
Accounts receivable ......................................... (88,686) (100,380)
Inventories ................................................. (917) 20
Prepaid expenses ............................................ (1,184) (2,101)
Deferred income tax assets and liabilities .................. 497 (2,349)
Accounts payable ............................................ 33,109 29,566
Accrued compensation and related liabilities ................ 582 4,501
Deferred revenue ............................................ 6,525 10,621
Accrued acquisition liabilities ............................. (5,369) (2,875)
Other accrued liabilities ................................... 54,576 80,590
Income taxes payable ........................................ 8,038 31,360
--------- ---------
Net cash provided by operating activities ................. 41,452 94,316
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment .................................. (46,584) (13,354)
Cash transferred for acquisitions and disposition, net of cash
acquired .......................................................... -- (982)
Increase in other assets ............................................ (1,431) (2,114)
Purchase of short-term investments .................................. (109,091) (129,256)
Liquidation and maturity of short-term investments .................. 85,115 107,813
--------- ---------
Net cash used in investing activities ..................... (71,991) (37,893)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt ................................ (1,553) (503)
Net proceeds from issuance of common stock .......................... 13,088 4,355
--------- ---------
Net cash provided by financing activities ................. 11,535 3,852
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................. (19,004) 60,275
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...................... 76,298 44,584
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................ $ 57,294 $ 104,859
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INTUIT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Intuit Inc. ("Intuit" or the "Company") is a leading developer of personal
finance, small business accounting, and tax preparation software. The Company
develops, markets, and supports software products and services that enable
individuals, professionals, and small businesses to automate commonly performed
financial tasks and better organize, understand, manage, and plan their
financial lives. Principal products include personal finance products and small
business accounting software, personal and professional tax software, online
financial services, and supplies such as invoice forms and checks. The Company
markets its products through distributors and retailers and by direct sales to
OEMs and individual users. The Company's customers are located primarily in
North America, Europe, and Asia.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the
Company for the three and six months ended January 31, 1996 and 1997 have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and include all adjustments (consisting of normal recurring
adjustments) that the Company considers necessary for a fair presentation of the
operating results and cash flows for those periods. Results of operations for
the three and six months ended January 31, 1997 are not necessarily indicative
of the results to be expected for the year ending July 31, 1997 or any future
period. These condensed consolidated financial statements and notes thereto
should be read in conjunction with the audited consolidated financial statements
for the fiscal year ended July 31, 1996 included in the Company's Annual Report
on Form 10-K dated October 24, 1996.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Significant estimates are used in determining both the collectibility of
accounts receivable and reserves for returns and exchanges, and in assessing the
carrying value of goodwill and purchased intangibles. Actual results could
differ from those estimates.
Net Revenue
Revenue is generally recognized at the time of shipment, net of allowances for
estimated future returns and for excess quantities in distribution channels,
provided that no significant vendor obligations exist and collections of
accounts receivable are probable. Reserves are provided for quantities of
current product versions that are considered excess and for inventories of all
previous versions of products at the time new product versions are introduced.
Advance payments are recorded as deferred revenue until the products are shipped
or services are provided. Rebate costs are provided at the time revenue is
recognized. The Company provides warranty reserves for the estimated cost of
replacing defective products at the time revenue is recognized.
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<PAGE> 7
Customer Service and Technical Support
Customer service and technical support costs include order processing, customer
inquiries and telephone assistance. The costs of post-contract customer support
are included in customer service and technical support expenses and are not
included in cost of goods sold.
Cash, Cash Equivalents, Short-Term Investments and Marketable Securities
The Company considers all highly liquid investments purchased with a maturity of
three months or less at date of acquisition to be cash equivalents.
Available-for-sale securities are carried at amortized cost which approximates
fair value. Marketable securities are carried at fair value. Unrealized gains
and losses on marketable securities are included in stockholders' equity. The
following is a summary of cash, cash equivalents, short-term investments and
marketable securities at January 31, 1997:
<TABLE>
<CAPTION>
GROSS UNREALIZED
----------------------------
(in thousands, unaudited) COST GAIN LOSS FAIR VALUE
---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents:
Cash ..................... $ 18,382 $ -- $ -- $ 18,382
Corporate notes .......... 7,994 -- -- 7,994
Money market funds ....... 9,322 -- -- 9,322
Municipal bonds .......... 19,480 -- -- 19,480
Commercial paper ......... 5,992 -- -- 5,992
U.S. Government securities 43,689 -- -- 43,689
-------- ----------- --------- --------
$104,859 $ -- $ -- $104,859
======== =========== ========= ========
Short-term investments:
Certificates of deposit .. $ 8,808 $ -- $ -- $ 8,808
Corporate notes .......... 25,920 -- -- 25,920
Municipal bonds .......... 107,672 -- -- 107,672
Corporate bonds .......... 5,027 -- -- 5,027
U.S. Government securities 23,547 -- -- 23,547
-------- ----------- --------- --------
$170,974 $ -- $ -- $170,974
======== =========== ========= ========
Marketable securities: -------- ----------- --------- --------
Checkfree common stock .... $185,850 $ -- $ (6,300) $179,550
======== =========== ========= ========
</TABLE>
Cash, cash equivalents, short-term investments and marketable securities totaled
$455.4 million at January 31, 1997. The gross unrealized loss of $6.3 million on
marketable securities at January 31, 1997 is before a tax benefit of $2.3
million. Marketable securities in Checkfree Corporation ("Checkfree") were
obtained as a result of the Company's sale of its online banking and bill
payment transaction processing business to Checkfree. See Note 3 of Notes to
Condensed Consolidated Financial Statements.
Goodwill and Intangible Assets
The excess cost over the fair value of net assets acquired (goodwill) is
generally amortized on a straight-line basis over periods generally not
exceeding three years. The cost of identified intangibles is generally amortized
on a straight-line basis over periods from 1 to 10 years. The carrying value of
goodwill and intangible assets is reviewed on a regular basis for the existence
of facts or circumstances, both internal and external, that may suggest
impairment. To date no such impairment has been indicated. Should there be an
impairment in the future, the Company will measure the amount of the impairment
based on undiscounted expected future cash flows from the impaired assets. The
cash flow estimates that will be used will reflect management's best estimates,
using
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<PAGE> 8
appropriate and customary assumptions and projections at the time. Components of
goodwill and intangible assets are as follows:
<TABLE>
<CAPTION>
NET BALANCE AT
LIFE IN JULY 31, JANUARY 31,
YEARS 1996 1997
------- -------- -----------
<S> <C> <C> <C>
(dollars in thousands; unaudited)
Goodwill............................. 3 $15,194 $9,301
Customer lists....................... 3-5 6,952 4,174
Covenants not to compete............. 4-5 4,248 2,950
Purchased technology................. 1-5 857 1,780
Other intangibles.................... 1-10 4,392 3,676
</TABLE>
Other intangibles include items such as trade names, logos, and other identified
intangible assets. The balances presented above are net of total accumulated
amortization of $125.1 million and $135.0 million at July 31, 1996 and January
31, 1997, respectively.
Concentration of Credit Risk
The Company's product revenues are concentrated in the personal computer
software industry, which is highly competitive and rapidly changing. Significant
technological changes in the industry or customer requirements, or the emergence
of competitive products with new capabilities or technologies, could adversely
affect the Company's operating results.
Financial investments that potentially subject the Company to concentration of
credit and/or valuation risk consist principally of short-term investments,
marketable securities and trade accounts receivable. The Company holds shares of
Checkfree common stock as marketable securities, representing approximately
19.6% of Checkfree's outstanding common stock. The Company's ability to dispose
of these securities is restricted by volume trading limitations and other
contractual arrangements. Subsequent declines in fair value below cost that are
deemed to be other than temporary will be reported in earnings. The Company's
remaining investment portfolio is diversified and generally consists of
short-term investment grade securities. The credit risk in the Company's
accounts receivable is mitigated by the fact that the Company performs ongoing
credit evaluations of its customers' financial condition and that accounts
receivable are primarily derived from customers in North America. Generally, no
collateral is required. The Company maintains reserves for estimated credit
losses and such losses have historically been within management's expectations.
New Accounting Standard
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which establishes a fair value method of
accounting for stock options and other equity instruments. The Company adopted
SFAS No. 123 beginning in fiscal year 1997 and will use the disclosure method as
described in the statement. The required disclosure will be included in the
Company's Annual Report on Form 10-K for the year ending July 31, 1997.
Reclassifications
Certain previously reported amounts have been reclassified to conform to the
current presentation format.
2. ACQUISITIONS
In January 1996, the Company completed its acquisition of Milkyway KK
("Milkyway"), a provider of PC-based financial software in Japan. The
acquisition was treated as a pooling of interests for accounting purposes. In
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addition to the issuance of 650,000 shares of Intuit common stock, the Company
recorded acquisition related expenses of $0.6 million. The accompanying
condensed consolidated financial statements are presented on a combined basis
for all periods.
In June 1996, the Company completed its acquisition of Interactive Insurance
Services Corp. ("IIS"), a developer of an Internet based system designed to
allow consumers to obtain personalized insurance information from national
insurance carriers via the World Wide Web. The acquisition, which was treated as
a purchase for accounting purposes, had a purchase price of approximately $9.0
million. Under the terms of the acquisition agreement, the Company issued
169,181 shares of Intuit common stock and options to purchase 3,255 shares of
Intuit common stock to IIS stock and option holders, respectively, at the date
of acquisition. Approximately $8.0 million of in-process research and
development was expensed in the quarter ended July 31, 1996. Pro forma
information for this acquisition has not been presented due to immateriality.
In September 1996, the Company completed its acquisition of GALT Technologies,
Inc. ("GALT"), a provider of mutual fund information on the World Wide Web. The
acquisition was treated as a purchase for accounting purposes. Under the terms
of the acquisition agreement, the Company issued 212,053 shares of Intuit common
stock and options to purchase approximately 33,686 shares of Intuit common stock
to GALT stock and option holders, respectively, at the date of acquisition. Of
the purchase price of $14.6 million, approximately $8.5 million was allocated to
identified intangible assets and goodwill, which will be amortized over a period
not to exceed three years. Approximately $4.9 million of in-process research and
development was expensed in the quarter ended October 31, 1996.
The following information shows the pro forma net revenue, net income (loss) and
net income (loss) per share of Intuit and GALT combined as if the acquisition
had taken place as of the beginning of fiscal 1996:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, 1996 January 31, 1996
------------------ ----------------
<S> <C> <C>
(In thousands, except per share amounts; unaudited)
Net revenue................................. $ 219,162 $ 321,520
Net income (loss) .......................... 20,470 (6,000)
Net income (loss) per common share.......... $ 0.43 $ (0.13)
</TABLE>
The unaudited pro forma results of operations for the six months ended January
31, 1996 reflect a charge for in-process research and development of $4.9
million. Both periods reflect the amortization of intangible assets related to
the GALT acquisition. Pro forma information for the six months ended January 31,
1997 is not being presented due to immateriality.
Consistent with the guidelines established by Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased or Otherwise Marketed" ("SFAS No. 86"), for each acquisition accounted
for as a purchase, the Company determined the amounts allocated to developed and
in-process research and development based on whether technological feasibility
had been achieved and whether there was an alternative future use for the
technology. Due to the absence of detailed program designs, evidence of
technological feasibility was established through the existence of a completed
working model at which point functions, features and technical performance
requirements can be demonstrated. As of the respective dates of the
acquisitions, the Company concluded that the in-process research and development
had no alternative future use after taking into consideration the potential for
usage of the software in different products, resale of the software and internal
usage. Accordingly, no amounts were capitalized on the basis of future
alternative use.
3. DISCONTINUED OPERATIONS AND DIVESTITURE
On January 27, 1997, the Company completed the sale of its online banking and
bill payment transaction processing subsidiary, Intuit Services Corporation
("ISC"), to Checkfree in exchange for 12.6
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<PAGE> 10
million shares of Checkfree common stock. The closing price of Checkfree common
stock was $14.75 per share on January 24, 1997. As a result of the divestiture,
the Company recorded a gain on sale of discontinued operations of $71.2 million,
net of tax, in the quarter ended January 31, 1997. This gain has been recorded
net of certain contingent items relating to the divested business which are
anticipated to be resolved by fiscal year end. In addition to this gain, the
Company recorded a $10 million service and license fee in January 1997 received
from Checkfree for providing connectivity to Quicken for Checkfree customers. In
February 1997, the Company sold two million shares of the acquired Checkfree
common stock, bringing its investment in Checkfree to approximately 19.6% of the
resulting 54.2 million shares of Checkfree common stock outstanding following
consummation of the transaction. The Company will account for its investment in
Checkfree using the cost method of accounting. See Notes 1 and 7 of Notes to
Condensed Consolidated Financial Statements.
The divested online banking and bill payment business of ISC has been accounted
for as a discontinued operation and, accordingly, its operating results have
been segregated for fiscal 1996. Revenue and net loss from discontinued
operations were $14.3 million and $6.3 million, respectively, for the fiscal
year ended 1996. Operating results for discontinued operations for the period
beginning August 1, 1996 until the close of the sale on January 27, 1997 were
deferred. The net loss from discontinued operations for the six month period
ended January 31, 1997 was approximately $5.8 million net of a tax benefit of
approximately $3.9 million. This loss was netted against the gain on sale of
discontinued operations.
4. OTHER ACCRUED LIABILITIES
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1996 1997
--------- -----------
<S> <C> <C>
(in thousands; unaudited)
Reserve for returns and exchanges.......... $24,229 64,454
Acquisition and disposition related items.. 3,677 24,085
Rebates.................................... 2,787 12,676
Post-customer contract support............. 3,500 10,960
Other accruals............................. 8,077 28,515
-------- ----------
$42,270 $140,690
======== ==========
</TABLE>
5. INCOME TAXES
The provision for income taxes was computed by applying the estimated annual
effective tax rate to recurring operations and amortization of intangible
assets, exclusive of the write-off of in-process research and development and
the amortization of goodwill.
6.LITIGATION
On March 29, 1994, Joann McGovern filed a class action lawsuit against ChipSoft
Inc. (which was subsequently merged into the Company) in the Chancery Division,
Circuit Court of Cook County, Illinois, on behalf of the plaintiff and other
purchasers of the 1993 HeadStart version of the Company's TurboTax tax
preparation software (the "Product"). The plaintiff asserts claims for breach of
express and implied warranties and violation of the Illinois Consumer Fraud Act
and seeks, on behalf of herself and purported class members, refund of the
purchase price as well as consequential and punitive damages. On September 19,
1996 the Company filed a motion for summary judgment on the plaintiff's Illinois
Consumer Fraud Act claim. The motion was granted on December 12, 1996, and the
plaintiff has indicated her intention to appeal this decision. The Company
believes that the plaintiff's claims are without merit and will continue to
defend the litigation vigorously. Additional details of the lawsuit are
contained in Item 3 of the Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1996.
On July 31, 1996, Trio Systems L.L.C. ("Trio") filed a lawsuit against the
Company in the U.S. District Court, Central District of California (Los Angeles)
alleging copyright infringement and violation of a license agreement. The
Company answered the complaint on September 3, 1996, denying all material
allegations. On October 28,
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<PAGE> 11
1996, the court denied Trio's motion for a preliminary injunction seeking to
prevent the Company from shipping any Intuit products containing Trio software,
including Quicken products. On February 19, 1997, the parties entered into a
settlement agreement and mutual release pursuant to which the Company purchased
a non-exclusive perpetual worldwide license from Trio to use, develop and
distribute Intuit and Intuit-related products containing certain Trio
technology. Additional details of the lawsuit are contained in Item 3 of the
Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1996.
The Company is subject to other legal proceedings and claims that arise in the
ordinary course of its business. While management currently believes that the
ultimate amount of liability, if any, with respect to any pending actions will
not materially affect the financial position, results of operations or liquidity
of the Company, the ultimate outcome of any litigation is uncertain. If an
unfavorable outcome were to occur, the impact could be material. Furthermore,
any litigation, regardless of outcome, can have an adverse impact on the Company
as a result of defense costs, diversion of management resources and other
factors. See Item 3 of the Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1996.
7. SUBSEQUENT EVENTS
In February 1997, the Company completed the planned sale of two million shares
of Checkfree common stock at a price of $14.625 per share. The shares were
acquired from Checkfree as a result of the Company's sale of its online banking
and bill payment processing subsidiary, ISC. The sale of the two million shares
reduced the Company's ownership interest in Checkfree to approximately 19.6% of
Checkfree's outstanding common stock. Net proceeds of the sale were $29.2
million and the realized loss on the sale was approximately $160,000, net of
tax. The Company continues to hold an investment in Checkfree Corporation of
10.6 million shares.
In February 1997, Intuit's Japanese subsidiary, Milkyway KK, signed an agreement
to acquire Nihon Micom Co. Ltd., a Japanese small business accounting software
company, for cash. The price of the planned acquisition, which is currently
expected to close in March 1997, is approximately $39 million. Under the
proposed acquisition agreement, options to purchase up to 200,000 shares of
Intuit common stock are to be granted to employees of Nihon Micom on or after
consummation of the acquisition. The Company intends to treat the acquisition as
a purchase for accounting purposes.
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<PAGE> 12
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements that include risks
and uncertainties. Statements that indicate that the Company "expects,"
"anticipates" or "believes" are forward-looking, as are all other statements
concerning future financial results, product offerings or other events that have
not yet occurred. There are several important factors that could cause actual
results to differ materially from those anticipated by the statements contained
in the following discussion. Such factors include, but are not limited to, the
growth rates of certain of the Company's market segments, the positioning of the
Company's products in those segments, the retail sell-through of tax preparation
products, personal finance and other products, particularly the leveling off or
decline of retail sales of the Company's Quicken product, the competitive
environment in the consumer and small business software industry, the emergence
of the electronic financial services marketplace, the cost of implementing the
Company's electronic financial services strategy, the possibility of calculation
errors or other "bugs" in the Company's software products, variations in the
cost of and demand for customer service and technical support, the Company's
ability to establish strategic relationships with financial institutions and
processors of financial information, the emergence of competition from these
entities as well as from software companies, the acceptance of online offers of
financial services by both financial institutions and prospective customers, the
Company's ability to manage its businesses in a rapidly changing environment,
and the timing and consumer acceptance of new Intuit product releases and
services including current users' willingness to upgrade from older versions of
the Company's products. Additional risks include the successful transition of
the Company's online banking and bill payment operations to Checkfree
Corporation, possible fluctuations in the value of the Company's investment in
Checkfree Corporation, the Company's ability to consummate planned acquisitions
and to integrate acquired operations into its existing business and the
Company's ability to penetrate international markets and manage its
international operations. Additional information on these and other factors
which could affect the Company's financial results are included in the Company's
Form 10-K for the fiscal year ended July 31, 1996 and its form 10-Q for the
fiscal quarter ended October 31, 1996 on file with the Securities and Exchange
Commission.
OVERVIEW
The Company experienced revenue growth of 21% and 15% for the three and six
months ended January 31, 1997 over the comparable periods of fiscal year 1996.
With respect to quarterly results, it should be noted that the Company's net
revenue varies significantly by quarter due to seasonality in consumer buying
patterns as well as the timing of new and upgraded product releases. Seasonality
is particularly strong for the Company's personal and professional tax return
preparation products, the sales of which are mostly compressed into the November
through March time frame. The second fiscal quarter has historically been and
continues to be the Company's strongest quarter in terms of both revenue and
profitability because of the seasonal shipments of tax return preparation
products during this period.
In January 1997, the Company completed the sale of its banking and bill payment
processing subsidiary, ISC, to Checkfree, pursuant to an agreement announced in
September 1996. As a result of this divestiture, the Company recorded a gain on
sale of discontinued operations, net of tax, of $71.2 million, for the three and
six months ended January 31, 1997.
In September 1996, the Company announced Internet-related strategic initiatives
designed to accelerate the adoption of electronic financial data exchange and
communication by individuals, small businesses and their financial service
providers. These initiatives included plans to "open" the architecture of the
Company's software products to financial service providers so that such
providers can connect directly through the Internet to their customers who
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<PAGE> 13
use Intuit products. In February 1997, the Company made a joint announcement
with Microsoft Corporation and Checkfree introducing a communication standard
with a single, unified technical specification, called Open Financial
Exchange(TM). Open Financial Exchange will enable financial institutions to
exchange financial data over the Internet with Web users and users of personal
finance, accounting and tax software.
The Company's earnings and stock price have been and may continue to be subject
to significant volatility, particularly on a quarterly basis. The Company has
previously experienced shortfalls in revenue and earnings from levels expected
by securities analysts, which has had an immediate and significant adverse
effect on the trading price of the Company's common stock. There can be no
assurance that this will not recur in the future. Additionally, the Company
participates in a highly dynamic industry which often results in significant
volatility of the Company's common stock price. In particular, the impact on the
Company's business of the adoption rate and degree of market acceptance of
electronic financial services, the introduction of competing electronic
financial services and investors' assessment of the Company's position in the
electronic financial services market, may result in significant increases in the
volatility of the Company's stock price. In addition, the trend towards
Internet-based products and services could have a material adverse effect on
sales of some of the Company's existing products.
ACQUISITIONS AND DIVESTITURE
In January 1996, the Company completed its acquisition of Milkyway KK
("Milkyway"), a provider of PC-based financial software in Japan. The
acquisition was treated as a pooling of interests for accounting purposes. In
addition to the issuance of 650,000 shares of Intuit common stock, the Company
recorded acquisition related expenses of $0.6 million. The accompanying
condensed consolidated financial statements, and discussion thereof, are
presented on a combined basis for all periods.
In June 1996, the Company completed its acquisition of Interactive Insurance
Services Corp. ("IIS"), a developer of an Internet based system designed to
allow consumers to obtain personalized insurance information from national
insurance carriers via the World Wide Web. The acquisition, which was treated as
a purchase for accounting purposes, had a purchase price of approximately $9.0
million. Under the terms of the acquisition agreement, the Company issued
169,181 shares of Intuit common stock and options to purchase 3,255 shares of
Intuit common stock to IIS stock and option holders, respectively, at the date
of acquisition. Approximately $8.0 million of in-process research and
development was expensed in the quarter ended July 31, 1996.
In September 1996, the Company completed its acquisition of GALT Technologies,
Inc. ("GALT"), a provider of mutual fund information on the World Wide Web. The
acquisition was treated as a purchase for accounting purposes. Under the terms
of the acquisition agreement, the Company issued 212,053 shares of Intuit common
stock and options to purchase approximately 33,686 shares of Intuit common stock
to GALT stock and option holders, respectively, at the date of acquisition. Of
the purchase price of $14.6 million, approximately $8.5 million was allocated to
identified intangible assets and goodwill which will be amortized over a period
not to exceed three years. Approximately $4.9 million of in-process research and
development was expensed in the quarter ended October 31, 1996.
Consistent with the guidelines established by Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased or Otherwise Marketed" ("SFAS No. 86"), for each acquisition accounted
for as a purchase, the Company determined the amounts allocated to developed and
in-process research and development based on whether technological feasibility
had been achieved and whether there was an alternative future use for the
technology. Due to the absence of detailed program designs, evidence of
technological feasibility was established through the existence of a completed
working model at which point functions, features and technical performance
requirements can be demonstrated. As of the respective dates of the
acquisitions, the Company concluded that the in-process research and development
had no alternative future use after taking into consideration the potential for
usage of the software in different products, resale of the software and internal
usage. Accordingly, no amounts were capitalized on the basis of future
alternative use.
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<PAGE> 14
Acquisition-related costs reduced net income by approximately $6.3 million and
$21.6 million for the three and six month periods ended January 31, 1997,
respectively, compared to $10.8 million and $21.4 million for the three and six
month periods ended January 31, 1996, respectively. Assuming no acquisitions in
addition to those discussed above and no impairment of value resulting in an
acceleration of amortization, the net income effect of future amortization is
anticipated to be approximately $25.5 million, $6.0 million, $3.6 million, and
$0.5 million for the fiscal years ending July 31, 1997 through 2000,
respectively. Because of the high levels of non-cash amortization expense
arising from the acquisitions discussed above, the Company may report
significant operating losses in the fiscal year ending July 31, 1997 and future
periods. In addition, if the Company completes additional acquisitions in the
future that are accounted for as purchases, operating results could be
materially adversely affected by future amortization relating to such
acquisitions.
On January 27, 1997, the Company completed the sale of its online banking and
bill payment transaction processing subsidiary, Intuit Services Corporation
("ISC"), to Checkfree Corporation ("Checkfree") in exchange for 12.6 million
shares of Checkfree common stock. The closing price of Checkfree common stock
was $14.75 per share on January 24, 1997. As a result of the divestiture, the
Company recorded a gain on sale of discontinued operations of $71.2 million, net
of tax, in the quarter ended January 31, 1997. This gain has been recorded net
of certain contingent items relating to the divested business which are
anticipated to be resolved by fiscal year end. In February 1997, the Company
sold two million shares of the acquired Checkfree common stock, bringing its
investment in Checkfree to approximately 19.6% of the resulting 54.2 million
shares of Checkfree common stock outstanding following consummation of the
transaction. The Company will account for its investment in Checkfree using the
cost method of accounting. See Notes 1, 3 and 7 of Notes to Condensed
Consolidated Financial Statements.
Although the Company believes the transactions discussed above were in the best
interests of the Company and its stockholders, there are significant risks
associated with these transactions. The acquisitions have expanded the Company's
size, product lines, personnel and geographic locations. The Company's ability
to integrate and organize these new businesses and successfully manage its
growth will necessitate improvements in its operational, financial and
management information systems. The Company is continually taking steps to
improve its internal processes, but there can be no assurance that problems in
these processes will not occur in the future. The divestiture of ISC has
resulted in the elimination of the Company's direct participation in the online
banking and bill payment processing business. The Company's investment in the
shares of Checkfree common stock could decrease in value due to market
fluctuations and the success or failure of Checkfree. If such decline was
determined to be other than temporary, charges to earnings would result. There
is also a risk that the Company will be unable to divest the Checkfree common
stock shares quickly because of contractual and legal restrictions on the sale
of such shares and the relatively large percentage of ownership of Checkfree
common stock by the Company.
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<PAGE> 15
RESULTS OF OPERATIONS
Set forth below are certain condensed consolidated statement of operations data
as well as such data as a percentage of net revenue for the three and six month
periods ended January 31, 1996 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
1996 1997
-------------------------- ----------------------------
(dollars in thousands; unaudited) Dollars % of Revenue Dollars % of Revenue
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net revenue:
Software......................................... $ 197,734 90.3% $ 240,921 90.6%
Supplies......................................... 21,262 9.7 25,057 9.4
------------ ------------ ----------- ------------
218,996 100.0 265,978 100.0
Costs and expenses:
Cost of goods sold:
Product...................................... 49,241 22.5 58,621 22.0
Amortization of purchased software........... 241 0.1 114 0.1
Customer service and technical support........... 34,631 15.8 40,559 15.3
Selling and marketing............................ 42,598 19.5 53,235 20.0
Research and development......................... 18,042 8.2 22,930 8.6
General and administrative....................... 9,945 4.6 10,718 4.0
Charge for purchased research and development.... -- -- -- --
Amortization of goodwill and purchased
intangibles.................................. 10,572 4.8 6,192 2.3
------------ ------------ ----------- ------------
Total costs and expenses................ 165,270 75.5 192,369 72.3
------------ ------------ ----------- ------------
Income from operations.................. 53,726 24.5 73,609 27.7
Interest and other income and expense, net........... 1,307 0.6 1,758 0.7
------------ ------------ ----------- ------------
Income from continuing operations before income
taxes............................................... 55,033 25.1 75,367 28.4
Income tax provision................................. 30,966 14.1 30,667 11.6
------------ ------------ ----------- ------------
Income from continuing operations.................... 24,067 11.0 44,700 16.8
Loss from operations of discontinued operations,
net of income tax benefit of $1,267................ (2,157) (1.0) --
--
Gain on sale of discontinued operations, net of
income tax provision of $52,617..................... -- -- 71,240 26.8
------------ ------------ ----------- ------------
Net income........................................... $ 21,910 10.0% $ 115,940 43.6%
============ ============ =========== ============
</TABLE>
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<PAGE> 16
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31,
1996 1997
------------------------ ----------------------
(dollars in thousands; unaudited) Dollars % of Revenue Dollars % of Revenue
------- ------------ ------- ------------
<S> <C> <C> <C> <C>
Net revenue:
Software .................................... $ 286,485 89.2% $325,416 88.3%
Supplies .................................... 34,761 10.8 43,068 11.7
--------- -------- -------- -----
321,246 100.0 368,484 100.0
Costs and expenses:
Cost of goods sold:
Product ................................. 76,657 23.9 85,666 23.3
Amortization of purchased software ...... 916 0.3 154 --
Customer service and technical support ...... 59,583 18.5 68,071 18.5
Selling and marketing ....................... 78,978 24.6 90,636 24.6
Research and development .................... 38,193 11.9 45,391 12.3
General and administrative .................. 19,998 6.2 22,624 6.1
Charge for purchased research and development -- -- 4,929 1.3
Amortization of goodwill and purchased
intangibles ............................. 20,447 6.4 16,494 4.5
--------- -------- -------- -----
Total costs and expenses ........... 294,772 91.8 333,965 90.6
--------- -------- -------- -----
Income from operations ............. 26,474 8.2 34,519 9.4
Interest and other income and expense, net ...... 3,371 1.1 3,806 1.0
--------- -------- -------- -----
Income from continuing operations before income
taxes .......................................... 29,845 9.3 38,325 10.4
Income tax provision ............................ 24,462 7.6 21,929 5.9
--------- -------- -------- -----
Income from continuing operations ............... 5,383 1.7 16,396 4.5
Loss from operations of discontinued operations,
net of income tax benefit of $2,229 ........... (3,795) (1.2) -- --
Gain on sale of discontinued operations, net of
income tax provision of $52,617 ................ -- -- 71,240 19.3
--------- -------- -------- -----
Net income ...................................... $ 1,588 0.5% $ 87,636 23.8%
========= ======== ======== =====
</TABLE>
NET REVENUE for the three and six month periods ended January 31, 1997 increased
over the comparable periods of fiscal 1996 by 21% and 15%, respectively. This
increase resulted primarily from higher sales of both personal and professional
versions of the Company's tax preparation products, and the release of new and
upgraded versions of small business finance products including QuickBooks
version 5.0 and QuickBooks Pro version 5.0 (including CD-ROM versions), which
resulted in increased unit sales. Also contributing to revenue growth were
increased financial supplies revenue over comparable periods in fiscal 1996
resulting primarily from an increasing QuickBooks user base. Due to the
seasonality of the Company's software sales, the proportion of net revenue
represented by supplies, which is a less seasonal business, will vary
considerably throughout the year. Overall net revenue increases were offset in
part by a decrease in Quicken net revenue resulting from a decrease in average
selling prices, a decrease in units shipped into the retail channel and
increasing OEM unit sales, which generate minimal revenue, during the three and
six month periods ended January 31, 1997, as compared with the three and six
month periods of the prior year. Net revenue for the three and six month periods
ended January 31, 1997 includes a $10 million service and license fee from
Checkfree for providing connectivity to Quicken for Checkfree customers.
While the initial sell-through of personal tax products for the first six months
of fiscal 1997 is encouraging, the Company cautions that it will be several
months before the financial results for the current tax season can be
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<PAGE> 17
determined. As in previous years, to assure wide availability of the tax return
preparation products at retail as tax filing deadlines approach, the Company
ships more tax product into the retail channel than is expected to sell through.
Consistent with prior years, a significant reserve is established at the time of
initial shipment for estimated product returns. However, there can be no
assurance that these reserves will be adequate to cover actual product returns.
Revenue is generally recognized at the time of product shipment or delivery of
electronic or other services, net of allowances for estimated future returns and
for excess quantities in distribution channels, provided that no significant
vendor obligations exist and collections of accounts receivable are probable.
Reserves are provided for quantities of current product versions that are
considered excess and for inventories of all previous versions of products at
the time new product versions are introduced. Advance payments are recorded as
deferred revenue until the products are shipped or services are provided. Rebate
costs are incurred at the time revenue is recognized. The Company provides
warranty reserves at the time revenue is recognized for the estimated cost of
replacing defective products. There can be no assurance that the reserves
established by the Company will be sufficient to cover future obligations.
The software industry, including the Company, is selling increasingly through
alternative channels, such as OEM, or "bundling" products for a single low
price. While this strategy introduces new customers to products, it also
significantly reduces average selling prices. The consumer software industry,
including the Company, has experienced significant platform shifts in the past,
such as from DOS to Windows and Windows 95. There is increased competition on
the Windows and Windows 95 platforms, including lower priced products and, at
times, free promotional products that compete with the Company's software. In
order to respond to these competitive pressures, the Company may use price
reductions and/or other promotional offers which could negatively impact net
revenue and income from operations. Alternatively, the Company could maintain
prices and risk losing market share. As platform shifts continue to occur, there
are risks that competitors could introduce new products before the Company's
products are available on a particular platform or that customers may not accept
a platform that the Company has chosen or will choose to pursue. Further
consolidation of the software industry or changes in the personal computer
industry could lead to increased competition in innovation and pricing
strategies. The Company cannot quantify the degree to which these factors have
affected or will affect its business and results of operations. In addition, a
number of the Company's competitors have greater financial resources than the
Company, potentially giving them a competitive advantage.
There can be no assurance that the Company's new or upgraded products will be
accepted, will not be delayed or canceled, or will not contain errors or "bugs"
that could affect the performance of the products or cause damage to a user's
data. If any of these events occurs, the Company may experience reduced net
revenue, loss of market share, increased maintenance release costs and higher
technical support costs. The Company derives significant portions of its
revenues from certain distributors and resellers. Bankruptcy or insolvency of a
distributor or retailer could materially adversely affect the Company's future
revenue streams for a period of time.
COST OF GOODS SOLD decreased to 22.1% and 23.3% of net revenue for the three and
six month periods ended January 31, 1997, respectively, from 22.6% and 24.2% of
net revenue for the three and six month periods ended January 31, 1996,
respectively. The Company anticipates that cost of goods sold will be affected
by approximately $0.6 million of acquisition-related amortization costs for the
full fiscal year 1997. Excluding acquisition related amortization costs, cost of
goods sold would have been 22.0% and 23.3% of net revenue for the three and six
month periods ended January 31, 1997, respectively, and 22.5% and 23.9% of net
revenue for the three and six month periods ended January 31, 1996,
respectively.
Software and services cost of goods sold, excluding acquisition-related
amortization costs, was 20.1% and 20.8% of software and services net revenue for
the three and six month periods ended January 31, 1997, compared to 20.4% and
21.6% in the three and six month periods ended January 31, 1996. This decrease
resulted primarily from a shift in the mix of product sales to higher margin
deluxe CD-ROM versions, reductions in the cost of materials and improved
inventory management. Supplies cost of goods sold decreased to 41.1% and 41.9%
of supplies net revenue for the three and six month periods ended January 31,
1997, compared to 41.5% and 42.6% in the three and six month periods ended
January 31, 1996, respectively. This decrease is primarily due to increased
efficiency in
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<PAGE> 18
the order taking process resulting in lower costs and fewer re-orders. The
Company plans to continue to take actions to improve efficiency and reduce the
materials costs of all its products. However, there can be no assurance that
margin improvements will be achieved or that current margins will be sustained.
During the three months ended January 31, 1996, a few minor calculation errors
were identified in the consumer versions of the TurboTax and MacInTax products,
and actions were taken during the quarter to notify users and provide fixes.
There can be no assurance that additional errors will not be discovered in the
future. Such errors could have a material adverse effect on the Company's
results of operations. The Company has guaranteed the calculations of its tax
products and will pay any penalties and interest due the IRS from its customers
as a result of calculation errors. As of January 31, 1997, claims made for such
errors have been insignificant, although significant claims may be received in
the future.
CUSTOMER SERVICE AND TECHNICAL SUPPORT expenses were 15.3% and 18.5% of net
revenue for the three and six month periods ended January 31, 1997,
respectively, compared to 15.8% and 18.5% of net revenue for the three and six
month periods ended January 31, 1996. The Company incurs a fixed base of support
costs, which is increased by seasonal staffing and third-party services during
periods of seasonally higher sales. Customer service and technical support costs
were slightly lower as a percentage of net revenue in the three month period
ended January 31, 1997 as compared to the same period a year ago, due in part to
decreased outsourcing and improved management of existing facilities and
resources. Customer service and technical support costs represented the same
percentage of net revenue for the six month periods ended January 31, 1997 and
1996. Post-contract customer support costs are accrued at the time revenue is
recognized, are included in customer service and technical support expenses and
are not included in cost of goods sold.
SELLING AND MARKETING expenses were 20.0% and 24.6% of net revenue for the three
and six month periods ended January 31, 1997, respectively, compared to 19.5%
and 24.6% of net revenue for the three and six month periods ended January 31,
1996, respectively. Selling and marketing expenses for the quarter increased as
a percentage of net revenue compared to the same period of the prior fiscal year
primarily as a result of increased marketing of key products and support of
international product launches in the quarter ended January 31, 1997. Year to
date selling and marketing expenses remained flat as a percentage of net revenue
compared to the same period in the prior year.
RESEARCH AND DEVELOPMENT expenses were 8.6% and 12.3% of net revenue for the
three and six month periods ended January 31, 1997, respectively and 8.2% and
11.9% of net revenue for the three and six month periods ended January 31, 1996,
respectively. The increases are due primarily to continued development of new
versions and upgrades of software products and development of electronic
commerce services in the insurance and investments areas. The Company has
experienced, and expects to continue to experience, significant growth in
research and development expenses, both in absolute dollars and as a percentage
of net revenue, for development efforts on new and existing products, including
foreign versions of its products.
GENERAL AND ADMINISTRATIVE expenses were 4.0% and 6.1% of net revenue for the
three and six month periods ended January 31, 1997, respectively, and 4.6% and
6.2% of net revenue for the three and six month periods ended January 31, 1996,
respectively.
INTEREST AND OTHER INCOME AND EXPENSE, NET, was $1.8 million and $3.8 million
for the three and six month periods ended January 31, 1997, respectively. This
compares to $1.3 million and $3.4 million, respectively, for the corresponding
periods in the prior year. This increase is primarily the result of increased
interest income due to higher average cash and short-term investment balances in
the current year.
INCOME TAXES. For the three months ended January 31, 1997, the Company recorded
an income tax provision of $30.7 million on pretax income of $75.4 million. The
tax rate differs from the statutory rate primarily because of the nondeductible
status of goodwill amortization. There was no valuation allowance for deferred
tax assets of $28.2 million at January 31, 1997 based on management's assessment
that current anticipated levels of taxable income will be sufficient to realize
the net deferred tax assets.
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<PAGE> 19
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's business has experienced and is expected to continue to experience
substantial seasonality, due principally to the timing of the tax return
preparation season, timing of launches for new or updated versions of products
and, to a lesser extent, consumer software buying patterns. Sales of the
Company's tax products are concentrated in the period from November, when
certain professional tax products are released, through March, when consumers
purchase tax preparation products in advance of the April 15 filing deadline. In
addition, sales of the Company's Quicken products are typically strongest during
the year-end holiday buying season. As a result of these seasonal patterns, the
Company typically generates more than 100% of its income from operations before
acquisition-related charges during its fiscal quarters ending January 31 and
April 30. Because of these seasonal factors and a significantly increased level
of operating expenses to support the Company's expanded infrastructure and
development efforts, the Company incurred significant losses from operations
before acquisition-related charges during its fiscal quarters ended July 31,
1996 and October 31, 1996. The Company expects to continue to report seasonal
losses before acquisition-related costs and amortization in the July and October
quarters of future fiscal years. In addition, the Company expects to incur
significant amortization expenses relating to historical and future acquisitions
which may be accounted for as purchases. Such amortization charges will
adversely affect operating income and net income in future quarters.
The Company's quarterly operating results have varied significantly in the past,
and are likely to vary significantly in the future, based upon a number of
factors. In addition to seasonal factors, the Company's quarterly operating
results can be affected significantly by the number and timing of new product or
version releases by the Company as well as the timing of product announcements
or introductions by the Company's competitors, discretionary marketing and
promotional expenditures, research and development expenditures and a variety of
non-recurring events such as acquisitions or claims relating to calculation
errors in the Company's tax products. Products are generally shipped as orders
are received and, consequently, quarterly sales and operating results depend
primarily on the volume and timing of orders received during the quarter, which
are difficult to forecast. A significant portion of the Company's operating
expenses are relatively fixed and planned expenditures are based on sales
forecasts. Thus, if net revenue levels are below expectations, operating results
are likely to be materially adversely affected. In particular, net income, if
any, may be disproportionately affected because only a small portion of the
Company's expenses varies with revenue in the short term. In response to
competition, the Company may also choose to reduce prices or increase spending,
which may adversely affect the Company's operating results and financial
condition. There can be no assurance that the Company will sustain revenue
growth in the future or be profitable in any future period. Due to the foregoing
factors, the Company believes that period-to-period comparisons of its results
of operations are not necessarily meaningful and should not be relied upon as
indications of future performance.
The markets in which the Company competes are characterized by ongoing
technological developments, frequent new product announcements and
introductions, evolving industry standards, changing customer requirements and
new competitors. The introduction of products and services embodying new
technologies and the emergence of new industry standards and practices,
including changes in tax laws, regulations or procedures, can render existing
products obsolete and unmarketable. The Company's future success depends upon
its ability to enhance its existing products and services, develop new products
and services that address the changing requirements of its customers, develop
additional products and services for new or other platforms and environments
(such as the Internet) and anticipate or respond to technological advances,
emerging industry standards and practices and changes in tax and other laws,
regulations and procedures in a timely, cost-effective manner. In response to
major industry changes reflected by the increasing popularity of the Internet
among consumers and financial service providers, the Company has expanded its
Internet strategy. There can be no assurance that such initiatives can be
successfully implemented or that they will result in increased revenue or
profits for the Company. Conversely, there can be no assurance that consumers'
use of the Internet, particularly for commercial transactions, will continue to
increase as rapidly as it has during the past few years.
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<PAGE> 20
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1997, the Company had $275.8 million in cash and short-term
investments excluding $179.6 million in marketable securities of Checkfree
common stock (see Notes 3 and 7 of Notes to Condensed Consolidated Financial
Statements), a $77.8 million increase from July 31, 1996. The increase was
primarily due to the seasonality of the Company's business which generally
results in the majority of net revenues and cash receipts occurring in the
January and April quarters. During the six months ended January 31, 1997,
operating activities provided $94.3 million in cash, compared with $41.5 million
in the six months ended January 31, 1996. The Company's investing activities
used $37.9 million in cash in the six months ended January 31, 1997 compared to
$72.0 million in the comparable period of the prior year. Investing activities
consisted primarily of net purchases of short-term investments and purchases of
property and equipment in both six month periods. The decrease in cash used for
investing activities in the six month period of the current year compared to the
six month period of the prior year is due primarily to higher fixed asset
expenditures in the prior year resulting from moving company headquarters to
Mountain View, California and relocating its San Diego, California operations to
a new facility. The Company's financing activities provided $3.9 million and
$11.5 million of cash in the six months ended January 31, 1997 and 1996,
respectively, due primarily to proceeds from the exercise of stock options.
The Company enters into leases for new or expanded facilities in the normal
course of its business. During fiscal 1996, the Company began moving its
headquarters from Menlo Park, California to larger facilities in Mountain View,
California. The move is expected to be completed in calendar year 1999. The
Company also relocated its operations in San Diego, California to a new office
facility in June 1996. The Company leases various other properties throughout
the world. Aside from the proposed Nihon Micom acquisition (see Note 7 of Notes
to Condensed Consolidated Financial Statements), the Company has no other
significant capital expenditure commitments, although additional cash may be
used for strategic acquisitions in the future.
The Company believes cash and short-term investments will be sufficient to meet
the Company's anticipated seasonal working capital and capital expenditure
requirements for at least the next twelve months.
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<PAGE> 21
PART II:OTHER INFORMATION
ITEM 1
LEGAL PROCEEDINGS
On March 29, 1994, Joann McGovern filed a class action lawsuit against ChipSoft
(which was subsequently merged into the Company) in the Chancery Division,
Circuit Court of Cook County, Illinois, on behalf of the plaintiff and other
purchasers of the 1993 HeadStart version of the Company's TurboTax tax
preparation software (the "Product"). The plaintiff asserts claims for breach of
express and implied warranties and violation of the Illinois Consumer Fraud Act
and seeks, on behalf of herself and purported class members, refund of the
purchase price as well as consequential and punitive damages. On September 19,
1996 the Company filed a motion for summary judgment on the plaintiff's Illinois
Consumer Fraud Act claim. The motion was granted on December 12, 1996, and the
plaintiff has indicated her intention to appeal this decision. The Company
believes that the plaintiff's claims are without merit and will continue to
defend the litigation vigorously. Additional details of the lawsuit are
contained in Item 3 of the Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1996.
On July 31, 1996, Trio Systems L.L.C. ("Trio") filed a lawsuit against the
Company in the U.S. District Court, Central District of California (Los Angeles)
alleging copyright infringement and violation of a license agreement. The
Company answered the complaint on September 3, 1996, denying all material
allegations. On October 28, 1996, the court denied Trio's motion for a
preliminary injunction seeking to prevent the Company from shipping any Intuit
products containing Trio software, including Quicken products. On February 19,
1997, the parties entered into a settlement agreement and mutual release
pursuant to which the Company purchased a non-exclusive perpetual worldwide
license from Trio to use, develop and distribute Intuit and Intuit-related
products containing certain Trio technology. Additional details of the lawsuit
are contained in Item 3 of the Company's Annual Report on Form 10-K for the
fiscal year ended July 31, 1996.
The Company is subject to other legal proceedings and claims that arise in the
ordinary course of its business. While management currently believes that the
ultimate amount of liability, if any, with respect to any pending actions will
not materially affect the financial position, results of operations or liquidity
of the Company, the ultimate outcome of any litigation is uncertain. If an
unfavorable outcome were to occur, the impact could be material. Furthermore,
any litigation, regardless of outcome, can have an adverse impact on the Company
as a result of defense costs, diversion of management resources and other
factors. See Item 3 of the Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1996.
-21-
<PAGE> 22
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 25, 1996, at the Company's Annual Meeting of Stockholders, Intuit's
stockholders approved the following proposals. Proxies were solicited by the
Company pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended. As of October 15, 1996, the record date for the Annual Meeting, there
were approximately 46,251,414 shares of Intuit Common Stock outstanding and
entitled to vote, of which 41,138,931 shares were present in person or by proxy
and voted at the meeting.
1. Proposal to elect six directors of the Company, each to serve until the
next Annual Meeting of Stockholders and until his successor is duly
elected and qualified or until his earlier resignation or removal.
<TABLE>
<CAPTION>
FOR AGAINST
--------------------- ---------------------
<S> <C> <C>
Christopher W. Brody 40,978,162 160,769
William V. Campbell 40,996,586 142,345
Scott D. Cook 40,996,767 142,164
L. John Doerr 40,996,697 142,234
Michael R. Hallman 40,996,247 142,684
Burton J. McMurtry 40,997,157 141,774
</TABLE>
2. Proposal to amend the Company's 1993 Equity Incentive Plan to increase
the number of shares of common stock available for issuance pursuant to
awards thereunder by 3,000,000 shares.
<TABLE>
<S> <C>
For 26,903,611
Against 5,753,426
Abstain 76,386
Broker Non-votes 8,405,508
</TABLE>
3. Proposal to approve the adoption of the 1996 Employee Stock Purchase
Plan and authorization of the issuance of 300,000 shares of common
stock thereunder.
<TABLE>
<S> <C>
For 33,294,147
Against 376,819
Abstain 66,956
Broker Non-votes 7,401,009
</TABLE>
4. Proposal to approve the adoption of the 1996 Directors Stock Option
Plan and authorization of the issuance of 120,000 shares of common
stock pursuant to stock options granted thereunder.
<TABLE>
<S> <C>
For 28,319,700
Against 5,331,868
Abstain 86,254
Broker Non-votes 7,401,109
</TABLE>
5. Proposal to ratify the selection of Ernst & Young LLP as independent
auditors for the Company for the current fiscal year ending July 31,
1997.
<TABLE>
<S> <C>
For 40,988,132
Against 98,285
Abstain 52,514
</TABLE>
-22-
<PAGE> 23
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
<TABLE>
<S> <C>
Exhibit 2.01 Agreement and Plan of Merger dated as of September 15, 1996 by and among
Intuit Inc., Intuit Services Corporation, Checkfree Corporation and
Checkfree Acquisition Corporation. Pursuant to Item 601 (b) (2) of
Regulation S-K, certain schedules have been omitted but will be furnished
supplementally to the Commission upon request. (1)
Exhibit 2.02 Amendment No. 1 to Agreement and Plan of Merger dated as of September 15,
1996 by and among Intuit Inc., Intuit Services Corporation, Checkfree
Corporation and Checkfree Acquisition Corporation II. (1)
Exhibit 4.01 Amended and Restated Registration Rights Agreement dated as of September
15, 1996 between Intuit Inc. and Checkfree Corporation. (1)
Exhibit 4.02 Amended and Restated Checkfree Corporation Stock Restriction Agreement
dated September 15, 1996 between Intuit Inc. and Checkfree Corporation.
(1)
Exhibit 10.01 Intuit Inc. 1993 Equity Incentive Plan, as amended through November 25,
1996.
Exhibit 10.02 Intuit Inc. 1996 Employee Stock Purchase Plan, as adopted on October 7,
1996.
Exhibit 10.03 Intuit Inc. 1996 Directors Stock Option Plan, as adopted on October 7,
1996.
Exhibit 11.01 Computation of net income per share.
Exhibit 27.01 Financial Data Schedule (filed only in electronic format)
</TABLE>
- ----------
(1) Incorporated by reference to the Company's report on Schedule 13D
with respect to its beneficial ownership of shares of Checkfree
Corporation filed on February 6, 1997.
(B) REPORTS ON FORM 8-K:
(i) On October 17, 1996, the Company filed a Form 8-K to report under
Item 5 its proposed sale of Intuit Services Corporation subsidiary
to Checkfree Corporation. No financial statements were filed.
(ii) On November 15, 1996, the Company filed a Form 8-K/A (amending a Form
8-K filed on September 18, 1996) relating to its acquisition of GALT
Technologies, Inc. ("GALT"). This amendment was filed in order to
include under Item 7 (a) the audited financial statements of GALT for
the year ended December 31, 1995 and the period from September 1, 1993
through December 31, 1994, and (b) unaudited pro forma condensed
combining financial information to give effect to the acquisition of
GALT by the Company as if the merger had taken place at July 31, 1996
(for balance sheet purposes) and July 31, 1995 (for statement of
operations purposes).
-23-
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTUIT INC.
(REGISTRANT)
Date: March 14, 1997 By: /s/ JAMES J. HEEGER
-------------------------------------
James J. Heeger
Senior Vice President and Chief
Financial Officer
Date: March 14, 1997 By: /s/ GREG J. SANTORA
-------------------------------------
Greg J. Santora
Vice President of Finance
-24-
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit 2.01 Agreement and Plan of Merger dated as of September 15, 1996 by and among
Intuit Inc., Intuit Services Corporation, Checkfree Corporation and
Checkfree Acquisition Corporation. Pursuant to Item 601 (b) (2) of
Regulation S-K, certain schedules have been omitted but will be furnished
supplementally to the Commission upon request. (1)
Exhibit 2.02 Amendment No. 1 to Agreement and Plan of Merger dated as of September 15,
1996 by and among Intuit Inc., Intuit Services Corporation, Checkfree
Corporation and Checkfree Acquisition Corporation II. (1)
Exhibit 4.01 Amended and Restated Registration Rights Agreement dated as of September
15, 1996 between Intuit Inc. and Checkfree Corporation. (1)
Exhibit 4.02 Amended and Restated Checkfree Corporation Stock Restriction Agreement
dated September 15, 1996 between Intuit Inc. and Checkfree Corporation.
(1)
Exhibit 10.01 Intuit Inc. 1993 Equity Incentive Plan, as amended through November 25,
1996.
Exhibit 10.02 Intuit Inc. 1996 Employee Stock Purchase Plan, as adopted on October 7,
1996.
Exhibit 10.03 Intuit Inc. 1996 Directors Stock Option Plan, as adopted on October 7,
1996.
Exhibit 11.01 Computation of net income per share.
Exhibit 27.01 Financial Data Schedule (filed only in electronic format)
</TABLE>
- ----------
(1) Incorporated by reference to the Company's report on Schedule 13D
with respect to its beneficial ownership of shares of Checkfree
Corporation filed on February 6, 1997.
<PAGE> 1
EXHIBIT 10.01
INTUIT INC.
1993 EQUITY INCENTIVE PLAN
As Adopted February 1, 1993
and Amended and Restated through November 25, 1996
1. PURPOSE. The purpose of the Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent,
Subsidiaries and Affiliates, by offering them an opportunity to participate in
the Company's future performance through awards of Options, Restricted Stock,
Stock Bonuses and Performance Awards. Capitalized terms not defined in the text
are defined in Section 24.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2
and 19, the total number of Shares reserved and available for grant and issuance
pursuant to Awards under the Plan shall be 11,000,000* Shares. Subject to
Sections 2.2 and 19, Shares shall again be available for grant and issuance in
connection with future Awards under the Plan that: (a) are subject to issuance
upon exercise of an Option but cease to be subject to such Option for any reason
other than exercise of such Option or (b) are subject to an Award that otherwise
terminates without Shares being issued and for which the participant did not
receive any benefits of ownership (other than voting rights).
2.2 Adjustment of Shares. In the event that the number
of outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under the Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards shall be
proportionately adjusted, subject to any required action by the Board or the
shareholders of the Company and compliance with applicable securities laws;
provided, however, that fractions of a Share shall not be issued but shall
either be paid in cash at Fair Market Value or shall be rounded up to the
nearest Share, as determined by the Committee; and provided, further, that the
Exercise Price of any Option may not be decreased to below the par value of the
Shares.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be
granted only to employees (including officers and directors who are also
employees) of the Company or of a
_______________
* Reflects 8/4/95 stock split
<PAGE> 2
Parent or Subsidiary of the Company. All other Awards may be granted to
employees, officers, directors, consultants, independent contractors and
advisors of the Company or any Parent, Subsidiary or Affiliate of the Company;
provided such consultants, contractors and advisors render bona fide services
not in connection with the offer and sale of securities in a capital-raising
transaction. A person may be granted more than one Award under the Plan. Each
person is eligible to receive up to an aggregate maximum of 1,000,000 Shares
over the term of the Plan.
4. ADMINISTRATION.
4.1 Committee Authority. The Plan shall be administered
by the Committee. Subject to the general purposes, terms and conditions of the
Plan, the Committee shall have full power to implement and carry out the Plan.
The Committee shall have the authority to:
(a) construe and interpret the Plan, any Award Agreement
and any other agreement or document executed pursuant
to the Plan;
(b) prescribe, amend and rescind rules and regulations
relating to the Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination, or in tandem with, in replacement of, or
as alternatives to, other Awards under the Plan or any
other incentive or compensation plan of the Company or
any Parent, Subsidiary or Affiliate of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of
Awards;
(i) correct any defect, supply any omission, or reconcile
any inconsistency in the Plan, any Award or any Award
Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable
for the administration of the Plan.
2
<PAGE> 3
4.2 Committee Discretion. Any determination made by the
Committee with respect to any Award shall be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
the Plan or Award, at any later time, and such determination shall be final and
binding on the Company and all persons having an interest in any Award under the
Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Award under the Plan to Participants who are not Insiders
of the Company.
4.3 Exchange Act Requirements. If two or more members
of the Board are Outside Directors, the Committee shall be comprised of at least
two members of the Board, all of whom are Outside Directors and Disinterested
Persons. The Company will take appropriate steps to comply with the
disinterested director requirements of Section 16(b) of the Exchange Act,
including but not limited to, the appointment by the Board of a Committee
consisting of not less than two persons (who are members of the Board), each of
whom is a Disinterested Person. It is the intent of the Company that the Plan
and Awards hereunder satisfy and be interpreted in a manner, that, in the case
of Participants who are or may be Insiders, satisfies the applicable
requirements of Rule 16b-3 (or its successor) of the Exchange Act. If any
provision of the Plan or of any Award would otherwise conflict with the intent
expressed in this Section 4.3, that provision to the extent possible shall be
interpreted and deemed amended so as to avoid such conflict.
5. OPTIONS. The Committee may grant Options to eligible persons
and shall determine whether such Options shall be Incentive Stock Options within
the meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the
number of Shares subject to the Option, the Exercise Price of the Option, the
period during which the Option may be exercised, and all other terms and
conditions of the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under the
Plan shall be evidenced by an Award Agreement which shall expressly identify the
Option as an ISO or NQSO ("Stock Option Agreement"), and be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee shall from time to time approve, and which shall comply with and be
subject to the terms and conditions of the Plan.
5.2 Date of Grant. The date of grant of an Option shall
be the date on which the Committee makes the determination to grant such Option,
unless otherwise specified by the Committee. The Stock Option Agreement and a
copy of the Plan will be delivered to the Participant within a reasonable time
after the granting of the Option.
5.3 Exercise Period. Options shall be exercisable
within the times or upon the events determined by the Committee as set forth in
the Stock Option Agreement; provided, however, that no Option shall be
exercisable after the expiration of ten (10) years from the date the Option is
granted; and provided further that no ISO granted to a person who directly or by
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Parent or Subsidiary of the
Company ("Ten Percent Shareholder") shall be exercisable after the expiration of
five (5) years from the date the Option
3
<PAGE> 4
is granted. The Committee also may provide for the exercise of Options to become
exercisable at one time or from time to time, periodically or otherwise, in such
number or percentage as the Committee determines.
5.4 Exercise Price. The Exercise Price shall be
determined by the Committee when the Option is granted and may be at less than
Fair Market Value (but not less than the par value of the Shares) if permitted
by the Exchange Act; provided, that (i) the Exercise Price of an ISO shall be
not less than 100% of the Fair Market Value of the Shares on the date of grant
and (ii) the Exercise Price of any ISO granted to a Ten Percent Shareholder
shall not be less than 110% of the Fair Market Value of the Shares on the date
of grant. Payment for the Shares purchased may be made in accordance with
Section 8 of the Plan.
5.5 Method of Exercise. Options may be exercised only
by delivery to the Company of a written exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares, if any, and such representations and
agreements regarding Participant's investment intent and access to information
and other matters, if any, as may be required or desirable by the Company to
comply with applicable securities laws, together with payment in full of the
Exercise Price for the number of Shares being purchased.
5.6 Termination. Notwithstanding the exercise periods
set forth in the Stock Option Agreement, exercise of an Option shall always be
subject to the following:
(a) If the Participant is Terminated for any reason except
death or Disability, then Participant may exercise such
Participant's Options only to the extent that such
Options would have been exercisable upon the
Termination Date no later than three (3) months after
the Termination Date (or such longer time period not
exceeding five years as may be determined by the
Committee), but in any event, no later than the
expiration date of the Options.
(b) If the Participant is terminated because of death or
Disability (or the Participant dies within three months
of such termination), then Participant's Options may be
exercised only to the extent that such Options would
have been exercisable by Participant on the Termination
Date and must be exercised by Participant (or
Participant's legal representative or authorized
assignee) no later than (i) twelve (12) months after
the Termination Date in the case of disability or (ii)
eighteen (18) months after the Termination Date in the
case of death (or such longer time period not exceeding
five years as may be determined by the Committee), but
in any event no later than the expiration date of the
Options.
4
<PAGE> 5
5.7 Limitations on Exercise. The Committee may specify
a reasonable minimum number of Shares that may be purchased on any exercise of
an Option; provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market
Value (determined as of the date of grant) of Shares with respect to which ISOs
are exercisable for the first time by a Participant during any calendar year
(under the Plan or under any other incentive stock option plan of the Company or
any Affiliate, Parent or Subsidiary of the Company) shall not exceed $100,000.
If the Fair Market Value of Shares on the date of grant with respect to which
ISOs are exercisable for the first time by a Participant during any calendar
year exceeds $100,000, the Options for the first $100,000 worth of Shares to
become exercisable in such calendar year shall be ISOs and the Options for the
amount in excess of $100,000 that become exercisable in that calendar year shall
be NQSOs. In the event that the Code or the regulations promulgated thereunder
are amended after the Effective Date of the Plan to provide for a different
limit on the Fair Market Value of Shares permitted to be subject to ISOs, such
different limit shall be automatically incorporated herein and shall apply to
any Options granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee
may modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor; provided that any such action may not, without
the written consent of Participant, impair any of Participant's rights under any
Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered shall be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 5.4 of the Plan for Options
granted on the date the action is taken to reduce the Exercise Price; and
provided, further, that the Exercise Price shall not be reduced below the par
value of the Shares, if any.
5.10 No Disqualification. Notwithstanding any other
provision in the Plan, no term of the Plan relating to ISOs shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be exercised, so as to disqualify the Plan under Section 422 of
the Code or, without the consent of the Participant affected, to disqualify any
ISO under Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee shall determine to whom an offer will be made, the number of
Shares the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares shall be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
5
<PAGE> 6
6.1 Restricted Stock Awards. All purchases under a
Restricted Stock Award made pursuant to the Plan shall be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that shall be in such form
(which need not be the same for each Participant) as the Committee shall from
time to time approve, and shall comply with and be subject to the terms and
conditions of the Plan. The offer of Restricted Stock shall be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer shall terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold
pursuant to a Restricted Stock Award shall be determined by the Committee and
may be at less than Fair Market Value (but not less than the par value of the
Shares) on the date the Restricted Stock Award is granted. Payment of the
Purchase Price may be made in accordance with Section 9 of the Plan.
6.3 Terms of Restricted Stock Awards. Restricted Stock
Awards shall be subject to such restrictions as the Committee may impose. These
restrictions may be based upon completion of a specified number of years of
service with the Company or upon completion of the performance goals as set out
in advance in the Participant's individual Award Agreement (the "Restricted
Stock Award Agreement") that shall be in such form (which need not be the same
for each Participant) as the Committee shall from time to time approve, and
shall comply with and be subject to the terms and conditions of the Plan.
Restricted Stock Awards may vary from Participant to Participant and between
groups of Participants. Prior to the grant of a Restricted Stock Award, the
Committee shall: (a) determine the nature, length and starting date of any
Performance Period for the Restricted Stock Award; (b) select from among the
Performance Factors to be used to measure performance goals, if any; and (c)
determine the number of Shares that may be awarded to the Participant. Prior to
the payment of any Restricted Stock Award, the Committee shall determine the
extent to which such Restricted Stock Award has been earned. Performance Periods
may overlap and Participants may participate simultaneously with respect to
Restricted Stock Awards that are subject to different Performance Periods and
having different performance goals and other criteria; provided, however that
the maximum Restricted Stock Award for each Participant with respect to any
Performance Period shall be thirty percent (30%) of the Shares reserved for
issuance under this Plan.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award
of Shares for services rendered to the Company or any Parent, Subsidiary or
Affiliate of the Company. No payment for the Shares shall be required. A Stock
Bonus may be awarded for past services already rendered to the Company, or any
Parent, Subsidiary or Affiliate of the Company pursuant to an Award Agreement
(the "Stock Bonus Agreement") that shall be in such form (which need not be the
same for each Participant) as the Committee shall from time to time approve, and
shall
6
<PAGE> 7
comply with and be subject to the terms and conditions of the Plan. No payment
for the Shares shall be required.
7.2 Terms of Stock Bonuses. Stock Bonus Awards shall be
subject to such restrictions as the Committee shall impose. These restrictions
may be based upon completion of a specified number of years of service with the
Company or upon completion of the performance goals as set out in advance in the
Participant's individual Award Agreement (the "Stock Bonus Agreement") that
shall be in such form (which need not be the same for each Participant) as the
Committee shall from time to time approve, and shall comply with and be subject
to the terms and conditions of the Plan. Stock Bonuses may vary from Participant
to Participant and between groups of Participants. Prior to the grant of a Stock
Bonus, the Committee shall: (a) determine the nature, length and starting date
of any Performance Period for the Stock Bonus; (b) select from among the
Performance Factors to be used to measure performance goals; and (c) determine
the number of Shares that may be awarded to the Participant. Prior to the
payment of any Stock Bonus, the Committee shall determine the extent to which
such Stock Bonus has been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Stock Bonuses that
are subject to different Performance Periods and having different performance
goals and other criteria; provided, however that the maximum Stock Bonus for
each Participant with respect to any Performance Period shall be be thirty
percent (30%) of the Shares reserved for issuance under this Plan.
7.3 Form of Payment. A Stock Bonus may be paid in the
form of cash, whole Shares, or a combination thereof, based on the Fair Market
Value on the date of payment, either in a lump sum payment or in installments,
all as the Committee shall determine, and to the extent applicable, shall be
subject to such conditions or restrictions as may be required to qualify for the
maximum exemption from Section 16 of the Exchange Act.
7.4 Termination During Performance Period. If a
Participant is Terminated during a Performance Period for any reason, then such
Participant shall be entitled to payment (whether in Shares, cash or otherwise)
with respect to the Stock Bonuses only to the extent earned as of the date of
Termination in accordance with the Stock Bonus Award Agreement, unless the
Committee shall determine otherwise.
8. PERFORMANCE AWARDS
8.1 Performance Awards. A Performance Award shall
consist of the grant to the Participant of a specified number of Performance
Units (the "Performance Unit"). The grant of a Performance Unit to a Participant
will entitle the Participant to receive a specified dollar value, variable under
conditions specified in the Performance Award, if the performance goals
specified in the Performance Award are achieved and the other terms and
conditions of the Performance Award are satisfied.
8.2 Terms of Performance Awards. Performance Awards shall be
evidenced by an Award Agreement (the "Performance Award Agreement") that shall
be in such form
7
<PAGE> 8
(which need not be the same for each Participant) as the Committee shall from
time to time approve, and shall comply with and be subject to the terms and
conditions of the Plan. Performance Awards shall be subject to such conditions
as the Committee may impose. Prior to the grant of a Performance Award, the
Committee shall: (a) specify the number of Performance Units granted to the
Participant; (b) specify the threshold and maximum dollar values of Performance
Units and the corresponding performance goals; (c) determine the nature, length
and starting date of any Performance Period for the Performance Award; and (d)
select from among the Performance Factors to be used to measure performance
goals. Prior to the payment of any Performance Award, the Committee shall
determine the extent to which such Performance Units have been earned.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Performance Awards that are subject to different Performance
Periods and having different performance goals and other criteria; provided,
however, that the maximum amount of any Performance Award for each Participant
with respect to any Performance Period shall be the lesser of two hundred and
fifty percent (250%) of the Participant's base salary at the time of the
Performance Award or one million dollars.
8.3 Form of Payment. Performance Awards may be paid currently
or on a deferred basis with such reasonable interest or dividend equivalent, if
any, as the Committee may determine. Payment may be made in the form of cash,
whole Shares, or a combination thereof, based on the Fair Market Value on the
date of payment, either in a lump sum payment or in installments, all as the
Committee shall determine.
8.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
shall be entitled to payment with respect to the Performance Awards only to the
extent earned as of the date of Termination in accordance with the Performance
Award Agreement, unless the Committee shall determine otherwise.
9. PAYMENT FOR SHARE PURCHASES.
9.1 Payment. Payment for Shares purchased pursuant to
the Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of Shares that either: (1) have been owned
by Participant for more than six (6) months and have
been paid for within the meaning of SEC Rule 144 (and,
if such shares were purchased from the Company by use
of a promissory note, such note has been fully paid
with respect to such Shares); or (2) were obtained by
Participant in the public market;
(c) by tender of a full recourse promissory note having
such terms as may be approved by the Committee and
bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of the
Code; provided,
8
<PAGE> 9
however, that Participants who are not employees of the
Company shall not be entitled to purchase Shares with a
promissory note unless the note is adequately secured
by collateral other than the Shares; provided, further,
that the portion of the Purchase Price equal to the par
value of the Shares, if any, must be paid in cash.
(d) by waiver of compensation due or accrued to Participant
for services rendered;
(e) by tender of property;
(f) with respect only to purchases upon exercise of an
Option, and provided that a public market for the
Company's stock exists:
(1) through a "same day sale" commitment from
Participant and a broker-dealer that is a
member of the National Association of
Securities Dealers (an "NASD Dealer") whereby
the Participant irrevocably elects to exercise
the Option and to sell a portion of the Shares
so purchased in order to pay for the Exercise
Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward
the Exercise Price directly to the Company; or
(2) through a "margin" commitment from Participant
and an NASD Dealer whereby Participant
irrevocably elects to exercise the Option and
to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a
loan from the NASD Dealer in the amount of the
Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such
Shares to forward the exercise price directly
to the Company;
or
(g) by any combination of the foregoing.
9.2 Loan Guarantees. The Committee may help the
Participant pay for Shares purchased under the Plan by authorizing a guarantee
by the Company of a third-party loan to the Participant.
10. WITHHOLDING TAXES.
10.1 Withholding Generally. Whenever Shares are to be
issued in satisfaction of Awards granted under the Plan, the Company may require
the Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever,
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<PAGE> 10
under the Plan, payments in satisfaction of Awards are to be made in cash, such
payment shall be net of an amount sufficient to satisfy federal, state, and
local withholding tax requirements.
10.2 Stock Withholding. When, under applicable tax
laws, a Participant incurs tax liability in connection with the exercise or
vesting of any Award that is subject to tax withholding and the Participant is
obligated to pay the Company the amount required to be withheld, the Committee
may allow the Participant to satisfy the minimum withholding tax obligation by
electing to have the Company withhold from the Shares to be issued that number
of Shares having a Fair Market Value equal to the minimum amount required to be
withheld, determined on the date that the amount of tax to be withheld is to be
determined (the "Tax Date"). All elections by a Participant to have Shares
withheld for this purpose shall be made in writing in a form acceptable to the
Committee and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, then except as provided below, the election
shall be irrevocable as to the particular Shares as to
which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Committee;
(d) if the Participant is an Insider and if the Company is
subject to Section 16(b) of the Exchange Act: (1) the
election may not be made within six (6) months of the
date of grant of the Award, except as otherwise
permitted by SEC Rule 16b-3(e) under the Exchange Act,
and (2) either (A) the election to use stock
withholding must be irrevocably made at least six (6)
months prior to the Tax Date (although such election
may be revoked at any time at least six (6) months
prior to the Tax Date) or (B) the exercise of the
Option or election to use stock withholding must be
made in the ten (10) day period beginning on the third
day following the release of the Company's quarterly or
annual summary statement of sales or earnings; and
(e) in the event that the Tax Date is deferred until six
(6) months after the delivery of Shares under Section
83(b) of the Code, the Participant shall receive the
full number of Shares with respect to which the
exercise occurs, but such Participant shall be
unconditionally obligated to tender back to the Company
the proper number of Shares on the Tax Date.
11. PRIVILEGES OF STOCK OWNERSHIP.
11.1 Voting and Dividends. No Participant shall have
any of the rights of a shareholder with respect to any Shares until the Shares
are issued to the Participant. After Shares are issued to the Participant, the
Participant shall be a shareholder and have all the rights of a shareholder with
respect to such Shares, including the right to vote and receive all dividends or
other distributions made or paid with respect to such Shares; provided, that if
such Shares are
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<PAGE> 11
Restricted Stock, then any new, additional or different securities the
Participant may become entitled to receive with respect to such Shares by virtue
of a stock dividend, stock split or any other change in the corporate or capital
structure of the Company shall be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant shall have no right to
retain such dividends or distributions with respect to Shares that are
repurchased at the Participant's original Purchase Price pursuant to Section 13.
11.2 Financial Statements. The Company shall provide
financial statements to each Participant prior to such Participant's purchase of
Shares under the Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company shall not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
12. TRANSFERABILITY. Awards granted under the Plan, and any
interest therein, shall not be transferable or assignable by Participant, and
may not be made subject to execution, attachment or similar process, otherwise
than by will or by the laws of descent and distribution or as consistent with
the specific Plan and Award Agreement provisions relating thereto. During the
lifetime of the Participant an Award shall be exercisable only by the
Participant, and any elections with respect to an Award, may be made only by the
Participant.
13. RESTRICTIONS ON SHARES. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award Agreement
a right to repurchase a portion of or all Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after the
later of Participant's Termination Date and the date Participant purchases
Shares under the Plan, for cash or cancellation of purchase money indebtedness
with respect to Shares that are not "Vested" (as defined in the Award
Agreement), at the Participant's original Purchase Price; provided, that the
right to repurchase at the original Purchase Price lapses at the rate of at
least 20% per year over 5 years from the date the Shares were purchased, and if
the right to repurchase is assignable, the assignee must pay the Company, upon
assignment of the right to repurchase, cash equal to the excess of the Fair
Market Value of the Shares over the original Purchase Price.
14. CERTIFICATES. All certificates for Shares or other
securities delivered under the Plan shall be subject to such stock transfer
orders, legends and other restrictions as the Committee may deem necessary or
advisable, including restrictions under any applicable federal, state or foreign
securities law, or any rules, regulations and other requirements of the SEC or
any stock exchange or automated quotation system upon which the Shares may be
listed.
15. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any
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<PAGE> 12
Participant who is permitted to execute a promissory note as partial or full
consideration for the purchase of Shares under the Plan shall be required to
pledge and deposit with the Company all or part of the Shares so purchased as
collateral to secure the payment of Participant's obligation to the Company
under the promissory note; provided, however, that the Committee may require or
accept other or additional forms of collateral to secure the payment of such
obligation and, in any event, the Company shall have full recourse against the
Participant under the promissory note notwithstanding any pledge of the
Participant's Shares or other collateral. In connection with any pledge of the
Shares, Participant shall be required to execute and deliver a written pledge
agreement in such form as the Committee shall from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
prorata basis as the promissory note is paid.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award
shall not be effective unless such Award is in compliance with all applicable
federal and state securities laws, rules and regulations of any governmental
body, and the requirements of any stock exchange or automated quotation system
upon which the Shares may then be listed, as they are in effect on the date of
grant of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in the Plan, the Company shall have no
obligation to issue or deliver certificates for Shares under the Plan prior to
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable, and/or (b) completion of any registration
or other qualification of such shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company shall be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company shall have no liability for any inability or failure to
do so.
17. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Award
granted under the Plan shall confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent, Subsidiary or Affiliate of the Company or limit
in any way the right of the Company or any Parent, Subsidiary or Affiliate of
the Company to terminate Participant's employment or other relationship at any
time, with or without cause.
18. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any
time or from time to time, authorize the Company, with the consent of the
respective Participants, to issue new Awards in exchange for the surrender and
cancellation of any or all outstanding Awards. The Committee may at any time buy
from a Participant an Option previously granted with payment in cash, Shares or
other consideration, based on such terms and conditions as the Committee and the
Participant shall agree.
12
<PAGE> 13
19. CORPORATE TRANSACTIONS.
19.1 Assumption or Replacement of Awards by Successor.
In the event of (a) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the Company and the Awards granted under the Plan are assumed or replaced by the
successor corporation, which assumption shall be binding on all Participants),
(b) a dissolution or liquidation of the Company, (c) the sale of substantially
all of the assets of the Company, or (d) any other transaction which qualifies
as a "corporate transaction" under Section 424(a) of the Code wherein the
shareholders of the Company give up all of their equity interest in the Company
(except for the acquisition, sale or transfer of all or substantially all of the
outstanding shares of the Company), any or all outstanding Awards may be assumed
or replaced by the successor corporation, which assumption or replacement shall
be binding on all Participants. In the alternative, the successor corporation
may substitute equivalent Awards or provide substantially similar consideration
to Participants as was provided to shareholders (after taking into account the
existing provisions of the Awards). The successor corporation may also issue, in
place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant. In the event such successor
corporation, if any, refuses to assume or substitute the Options, as provided
above, pursuant to a transaction described in this Subsection 19.1, such Options
shall expire on such transaction at such time and on such conditions as the
Board shall determine.
19.2 Other Treatment of Awards. Subject to any greater
rights granted to Participants under the foregoing provisions of this Section
19, in the event of the occurrence of any transaction described in Section 19.1,
any outstanding Awards shall be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation, sale of assets or
other "corporate transaction."
19.3 Assumption of Awards by the Company. The Company,
from time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (a) granting an Award under the Plan in substitution of
such other company's award, or (b) assuming such award as if it had been granted
under the Plan if the terms of such assumed award could be applied to an Award
granted under the Plan. Such substitution or assumption shall be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under the Plan if the other company had applied the rules of
the Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award shall remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
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<PAGE> 14
20. ADOPTION AND SHAREHOLDER APPROVAL. The Plan shall become
effective on the date that it is adopted by the Board (the "Effective Date").
The Plan shall be approved by the shareholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
months before or after the Effective Date. Upon the Effective Date, the Board
may grant Awards pursuant to the Plan; provided, however, that: (a) no Option
may be exercised prior to initial shareholder approval of the Plan; (b) no
Option granted pursuant to an increase in the number of Shares approved by the
Board shall be exercised prior to the time such increase has been approved by
the shareholders of the Company; and (c) in the event that shareholder approval
is not obtained within the time period provided herein, all Awards granted
hereunder shall be canceled, any Shares issued pursuant to any Award shall be
canceled and any purchase of Shares hereunder shall be rescinded. After the
Company becomes subject to Section 16(b) of the Exchange Act, the Company will
comply with the requirements of Rule 16b-3 (or its successor), as amended, with
respect to shareholder approval.
21. TERM OF PLAN. The Plan will terminate ten (10) years from
the Effective Date or, if earlier, the date of shareholder approval.
22. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend the Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to the Plan; provided, however, that the Board shall not, without the approval
of the shareholders of the Company, amend the Plan in any manner that requires
such shareholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or pursuant to the Exchange Act
or Rule 16b-3 (or its successor), as amended, thereunder; provided, further,
that no amendment may be made to outstanding Awards without the consent of the
Participant.
23. NONEXCLUSIVITY OF THE PLAN; UNFUNDED PLAN. Neither the
adoption of the Plan by the Board, the submission of the Plan to the
shareholders of the Company for approval, nor any provision of the Plan shall be
construed as creating any limitations on the power of the Board to adopt such
additional compensation arrangements as it may deem desirable, including,
without limitation, the granting of stock options and bonuses otherwise than
under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases. The Plan shall be unfunded. Neither the
Company nor the Board shall be required to segregate any assets that may at any
time be represented by Awards made pursuant to the Plan. Neither the Company,
the Committee, nor the Board shall be deemed to be a trustee of any amounts to
be paid under the Plan.
24. DEFINITIONS. As used in the Plan, the following terms shall
have the following meanings:
"Affiliate" means any corporation that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, another corporation, where "control" (including
the terms "controlled by" and "under common control with") means the possession,
direct or indirect, of the power to cause the direction of the
14
<PAGE> 15
management and policies of the corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Award" means any award under the Plan, including any
Option, Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award,
the signed written agreement between the Company and the Participant setting
forth the terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Committee" means the committee appointed by the Board
to administer the Plan, or if no committee is appointed, the Board.
"Company" means Intuit, a corporation organized under
the laws of the State of Delaware, or any successor corporation.
"Disability" means a disability, whether temporary or
permanent, partial or total, within the meaning of Section 22(e)(3) of the Code,
as determined by the Committee.
"Disinterested Person" means a director who has not,
during the period that person is a member of the Committee and for one year
prior to service as a member of the Committee, been granted or awarded equity
securities pursuant to the Plan or any other plan of the Company or any Parent,
Subsidiary or Affiliate of the Company, except in accordance with the
requirements set forth in Rules as promulgated by the SEC under Section 16(b) of
the Exchange Act, as such Rules are amended from time to time and as interpreted
by the SEC.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Exercise Price" means the price at which a holder of
an Option may purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of
a share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the NASDAQ
National Market System, its last reported sale price on
the NASDAQ National Market System or, if no such
reported sale takes place on such date, the average of
the closing bid and asked prices;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, the last
reported sale price or, if no such reported sale
15
<PAGE> 16
takes place on such date, the average of the closing
bid and asked prices on the principal national
securities exchange on which the Common Stock is listed
or admitted to trading;
(c) if such Common Stock is publicly traded but is not
quoted on the NASDAQ National Market System nor listed
or admitted to trading on a national securities
exchange, the average of the closing bid and asked
prices on such date, as reported by The Wall Street
Journal, for the over-the-counter market; or
(d) if none of the foregoing is applicable, by the Board of
Directors of the Company in good faith.
"Insider" means an officer or director of the Company
or any other person whose transactions in the Company's Common Stock are subject
to Section 15 of the Exchange Act.
"Option" means an award of an option to purchase Shares
pursuant to Section 5.
"Outside Director" means any outside director as
defined in Section 162(m) of the Code and the regulations issued thereunder.
"Parent" means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company, if at the time of
the granting of an Award under the Plan, each of such corporations other than
the Company owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
"Participant" means a person who receives an Award
under the Plan.
"Performance Award" means an award of Shares, or cash
in lieu of Shares, pursuant to Section 8.
"Performance Factors" means the factors selected by the
Committee from among the following measures to determine whether the performance
goals established by the Committee and applicable to Awards have been satisfied:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and amortization and/or
earnings before income taxes and amortization growth;
(c) Operating income and/or operating income growth;
16
<PAGE> 17
(d) Net income and/or net income growth;
(e) Earnings per share and/or earnings per share growth;
(f) Total shareholder return and/or total shareholder
return growth;
(g) Return on equity;
(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on income;
(j) Economic value added; and
(k) Individual confidential business objectives.
"Performance Period" means the period of service
determined by the Committee, not to exceed five years, during which years of
service or performance is to be measured for Restricted Stock Awards, Stock
Bonuses or Performance Awards.
"Plan" means this Intuit 1993 Equity Incentive Plan, as
amended from time-to-time.
"Restricted Stock Award" means an award of Shares
pursuant to Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Shares" means shares of the Company's Common Stock
$0.01 par value, reserved for issuance under the Plan, as adjusted pursuant to
Sections 2 and 17, and any successor security.
"Stock Bonus" means an award of Shares, or cash in lieu
of Shares, pursuant to Section 7.
"Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if, at
the time of granting of the Award, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
"Termination" or "Terminated" means, for purposes of
the Plan with respect to a Participant, that the Participant has ceased to
provide services as an employee, director, consultant, independent contractor or
adviser, to the Company or a Parent, Subsidiary or Affiliate
17
<PAGE> 18
of the Company, except in the case of sick leave, military leave, or any other
leave of absence approved by the Committee; provided, that such leave is for a
period of not more than ninety (90) days, or reinstatement upon the expiration
of such leave is guaranteed by contract or statute. The Committee shall have
sole discretion to determine whether a Participant has ceased to provide
services and the effective date on which the Participant ceased to provide
services (the "Termination Date").
18
<PAGE> 1
EXHIBIT 10.02
INTUIT INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
As Adopted on October 7, 1996
1. ESTABLISHMENT OF PLAN. Intuit Inc., a Delaware corporation (the
"Company"), proposes to grant options for purchase of the Company's Common
Stock, $0.01 par value, to eligible employees of the Company and its
Subsidiaries (as hereinafter defined) pursuant to this Employee Stock Purchase
Plan (this "Plan"). For purposes of this Plan, "Parent Corporation" and
"Subsidiary" (collectively, "Subsidiaries") shall have the same meanings as
"parent corporation" and "subsidiary corporation" in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code of 1986, as amended (the "Code"). The
Company intends this Plan to qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments to or replacements of such
Section), and this Plan shall be so construed. Any term not expressly defined
in this Plan but defined for purposes of Section 423 of the Code shall have the
same definition herein. A total of 300,000 shares of the Company's Common Stock
is reserved for issuance under this Plan. Such number shall be subject to
adjustments effected in accordance with Section 14 of this Plan.
2. PURPOSE. The purpose of this Plan is to provide employees of the
Company, or of any Subsidiary designated by the Board of Directors of the
Company (the "Board") as eligible to participate in this Plan, with a convenient
means of acquiring an equity interest in the Company through payroll deductions,
to enhance such employees' sense of participation in the affairs of the Company
and Subsidiaries, and to provide an incentive for continued employment.
3. ADMINISTRATION. This Plan shall be administered by a committee
appointed by the Board (the "Committee"). If two or more members of the Board
are "Outside Directors" within the meaning of Code Section 162(m), the Committee
will be comprised of at least two (2) members of the Board, all of whom are
Outside Directors. As used in this Plan, references to the "Committee" shall
mean either such committee or the Board if no committee has been established.
Subject to the provisions of this Plan and the limitations of Section 423 of the
Code or any successor provision in the Code, all questions of interpretation or
application of this Plan shall be determined by the Committee and its decisions
shall be final and binding upon all participants. Members of the Committee shall
receive no compensation for their services in connection with the administration
of this Plan, other than standard fees as established from time to time by the
Committee for services rendered by Committee members serving on Board
committees. All expenses incurred in connection with the administration of this
Plan shall be paid by the Company.
4. ELIGIBILITY. Any employee of the Company, or of any Subsidiary
designated by the Board as eligible to participate in this Plan) is eligible to
participate in an Offering Period (as hereinafter defined) under this Plan
except the following:
(a) employees who are not employed by the Company or Subsidiaries
fifteen (15) days before the beginning of such Offering Period;
(b) employees who are customarily employed for less than twenty
(20) hours per week;
(c) employees who are customarily employed for less than five (5)
months in a calendar year;
(d) employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the Code, own stock
or hold options to purchase stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company or
any of its Subsidiaries or who, as a result of being granted an option under
this Plan with respect to such Offering Period, would own stock or
<PAGE> 2
Intuit Inc.
1996 Employee Stock Purchase Plan
hold options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Subsidiaries.
5. OFFERING DATES. The offering periods of this Plan (each, an
"Offering Period") shall be of six (6) months duration commencing on January 1
and July 1 of each year and ending on June 30 and December 31 of each year.
Within such guidelines, the Board shall determine the first day of the initial
Offering Period. The first business day of each Offering Period is referred to
as the "Offering Date". The last business day of each Offering Period is
referred to as the "Purchase Date". The Board shall have the power to change the
duration of Offering Periods with respect to future offerings without
stockholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to be affected.
6. PARTICIPATION IN THIS PLAN. Eligible employees may become
participants in an Offering Period under this Plan on the first Offering Date
after satisfying the eligibility requirements by delivering a subscription
agreement to the Company not later than fifteen (15) days before such Offering
Date unless a later time for filing the subscription agreement authorizing
payroll deductions is set by the Committee for all eligible employees with
respect to a given Offering Period. An eligible employee who does not deliver a
subscription agreement to the Company by such date after becoming eligible to
participate in such Offering Period shall not participate in that Offering
Period or any subsequent Offering Period unless such employee enrolls in this
Plan by filing a subscription agreement with the Company not later than fifteen
(15) days preceding a subsequent Offering Date. Once an employee becomes a
participant in an Offering Period, such employee will automatically participate
in the Offering Period commencing immediately following the last day of the
prior Offering Period unless the employee withdraws or is deemed to withdraw
from this Plan or terminates further participation in the Offering Period as set
forth in Section 11 below. Such participant is not required to file any
additional subscription agreement in order to continue participation in this
Plan.
7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Offering Period by (b) the lower of (i)
eighty-five percent (85%) of the fair market value of a share of the Company's
Common Stock on the Offering Date (but in no event less than the par value of a
share of the Company's Common Stock), or (ii) eighty-five percent (85%) of the
fair market value of a share of the Company's Common Stock on the Purchase Date
(but in no event less than the par value of a share of the Company's Common
Stock); provided, however, that the number of shares of the Company's Common
Stock subject to any option granted pursuant to this Plan shall not exceed the
maximum number of shares which may be purchased pursuant to Section 10(b) or
10(c) below with respect to the applicable Offering Period. The fair market
value of a share of the Company's Common Stock shall be determined as provided
in Section 8 hereof.
8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date;
provided, however, that in no event may the purchase price per share of the
Company's Common Stock be below the par value per share of the Company's Common
Stock.
For purposes of this Plan, the term "Fair Market Value" means as
of any date, the value OF a share of the Company's Common Stock determined as
follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market, its last reported sale price on the
Nasdaq National Market or, if no such reported sale
takes place on such date, the average of the closing
bid and asked prices;
-2-
<PAGE> 3
Intuit Inc.
1996 Employee Stock Purchase Plan
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, its last
reported sale price or, if no such reported sale takes
place on such date, the average of the closing bid and
asked prices on the principal national securities
exchange on which the Common Stock is listed or
admitted to trading;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market or listed or
admitted to trading on a national securities exchange,
the average of the closing bid and asked prices on such
date, as reported in The Wall Street Journal, for the
over-the-counter market; or
(d) if none of the foregoing is applicable, by the Board in
good faith.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE
OF SHARES.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period. The deductions are made as
a percentage of the participant's compensation in one percent (1%) increments
not less than two percent (2%), nor greater than ten percent (10%) or such lower
limit set by the Committee. Compensation shall mean base salary. Payroll
deductions shall commence on the first payday following the Offering Date and
shall continue to the end of the Offering Period unless sooner altered or
terminated as provided in this Plan.
(b) A participant may lower (but not increase) the rate of payroll
deductions during an Offering Period by filing with the Company a new
authorization for payroll deductions, in which case the new rate shall become
effective for the next payroll period commencing more than fifteen (15) days
after the Company's receipt of the authorization and shall continue for the
remainder of the Offering Period unless changed as described below. Such change
in the rate of payroll deductions may be made at any time during an Offering
Period, but not more than one (1) change may be made effective during any
Offering Period. A participant may increase or decrease the rate of payroll
deductions for any subsequent Offering Period by filing with the Company a new
authorization for payroll deductions not later than fifteen (15) days before the
beginning of such Offering Period.
(c) All payroll deductions made for a participant are credited to
his or her account under this Plan and are deposited with the general funds of
the Company. No interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(d) On each Purchase Date, so long as this Plan remains in effect
and provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under this Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8
of this Plan. Any cash remaining in a participant's account after such purchase
of shares shall be carried forward, without interest, into the next Offering
Period; provided, however, that in the event that this Plan has been
oversubscribed, all funds not used to purchase shares on the Purchase Date shall
be returned to the participant, without interest. No Common Stock shall be
purchased on a Purchase Date on behalf of any employee whose participation in
this Plan has terminated prior to such Purchase Date.
(e) As promptly as practicable after the Purchase Date, the Company
shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.
(f) During a participant's lifetime, such participant's option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until
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Intuit Inc.
1996 Employee Stock Purchase Plan
such option has been exercised. Shares issued for the benefit of a
participant under this Plan will be issued in the name of the participant or in
the name of the participant and his or her spouse.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) No participant shall be entitled to purchase stock under this
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan.
(b) No more than two hundred percent (200%) of the number of
shares determined by using eighty-five percent (85%) of the fair market value of
a share of the Company's Common Stock on the Offering Date as the denominator
may be purchased by a participant on any single Purchase Date.
(c) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Not less
than thirty (30) days prior to the commencement of any Offering Period, the
Committee may, in its sole discretion, set a maximum number of shares which may
be purchased by any employee at any single Purchase Date (hereinafter the
"Maximum Share Amount"). In no event shall the Maximum Share Amount exceed the
amounts permitted under Section 10(b) above. If a new Maximum Share Amount is
set, then all participants must be notified of such Maximum Share Amount not
less than fifteen (15) days prior to the commencement of the next Offering
Period. Once the Maximum Share Amount is set, it shall continue to apply with
respect to all succeeding Offering Periods unless revised by the Committee as
set forth above.
(d) If the number of shares to be purchased on a Purchase Date by
all employees participating in this Plan exceeds the number of shares then
available for issuance under this Plan, then the Company will make a pro rata
allocation of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable. In such event,
the Company shall give written notice of such reduction of the number of shares
to be purchased under a participant's option to each participant affected
thereby.
(e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
applicable Offering Period, without interest.
11. WITHDRAWAL.
(a) Each participant may withdraw from an Offering Period under
this Plan by signing and delivering to the Company a written notice to that
effect on a form provided for such purpose. Such withdrawal may be elected at
any time at least fifteen (15) days prior to the end of an Offering Period.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
voluntarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth above for initial participation in
this Plan.
12. TERMINATION OF EMPLOYMENT. Termination of a participant's
employment for any reason, including retirement, death or the failure of a
participant to remain an eligible employee, immediately terminates his or her
participation in this Plan. In such event, the payroll deductions credited to
the participant's account will be returned to him or her or, in the case of his
or her death, to his or her legal representative, without interest. For purposes
of this Section 12, an employee will not be deemed to have terminated employment
or failed to remain in the continuous employ of the Company in the case of sick
leave, military leave, or any other leave of absence approved
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Intuit Inc.
1996 Employee Stock Purchase Plan
by the Committee; provided that such leave is for a period of not more than
ninety (90) days or reemployment upon the expiration of such leave is guaranteed
by contract or statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall promptly deliver to the participant all payroll deductions credited to
such participant's account. No interest shall accrue on the payroll deductions
of a participant in this Plan.
14. CAPITAL CHANGES. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under this Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under this Plan but have
not yet been placed under option (collectively, the "Reserves"), as well as the
price per share of Common Stock covered by each option under this Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration"; and provided further, that the price per
share of Common Stock shall not be reduced below its par value per share. Such
adjustment shall be made by the Board, whose determination shall be final,
binding and conclusive. Except as expressly provided herein, no issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that the options
under this Plan shall terminate as of a date fixed by the Board and give each
participant the right to exercise his or her option as to all of the optioned
stock, including shares which would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger or consolidation of the Company with or into another corporation,
each option under this Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, that the participant
shall have the right to exercise the option as to all of the optioned stock. If
the Board makes an option exercisable in lieu of assumption or substitution in
the event of a merger, consolidation or sale of assets, the Board shall notify
the participant that the option shall be fully exercisable for a period of
twenty (20) days from the date of such notice, and the option will terminate
upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation; provided, that the price per share of Common Stock shall not
be reduced below its par value per share.
15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
16. REPORTS. Individual accounts will be maintained for each
participant in this Plan. Each participant shall receive promptly after the end
of each Offering Period a report of his or her account setting forth the total
payroll deductions accumulated, the number of shares purchased, the per share
price thereof and the remaining cash balance, if any, carried forward to the
next Offering Period.
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Intuit Inc.
1996 Employee Stock Purchase Plan
17. NOTICE OF DISPOSITION. Each participant shall notify the Company if
the participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two (2) years from the
Offering Date or within one (1) year from the Purchase Date on which such shares
were purchased (the "Notice Period"). Unless such participant is disposing of
any of such shares during the Notice Period, such participant shall keep the
certificates issued to him or her that represent shares purchased hereunder in
his or her name (and not in the name of a nominee) during the Notice Period. The
Company may, at any time during the Notice Period, place a legend or legends on
any certificate representing shares acquired pursuant to this Plan requesting
the Company's transfer agent to notify the Company of any transfer of the
shares. The obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Subsidiary, or restrict the right of the Company or
any Subsidiary to terminate such employee's employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have
equal rights and privileges with respect to this Plan so that this Plan
qualifies as an "employee stock purchase plan" within the meaning of Section 423
or any successor provision of the Code and the related regulations. Any
provision of this Plan which is inconsistent with Section 423 or any successor
provision of the Code shall, without further act or amendment by the Company or
the Board, be reformed to comply with the requirements of Section 423. This
Section 19 shall take precedence over all other provisions in this Plan.
20. NOTICES. All notices or other communications by a participant to
the Company under or in connection with this Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. This Plan shall become effective on the
date that it is adopted by the Board. This Plan shall be approved by the
stockholders of the Company, in any manner permitted by applicable corporate
law, within twelve (12) months before or after the date this Plan is adopted by
the Board. No purchase of shares pursuant to this Plan shall occur prior to such
stockholder approval. This Plan shall continue until the earlier to occur of (a)
termination of this Plan by the Board (which termination may be effected by the
Board at any time), (b) issuance of all of the shares of Common Stock reserved
for issuance under this Plan, or (c) ten (10) years from the adoption of this
Plan by the Board.
22. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under this Plan in the event of such participant's death
subsequent to the end of an Offering Period but prior to delivery to him of such
shares and cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under this
Plan in the event of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such
shares or cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities
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<PAGE> 7
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange or automated quotation system upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.
25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the stockholders of the Company obtained in accordance with
Section 21 hereof within twelve (12) months of the adoption of such amendment
(or earlier if required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under this
Plan;
(b) change the designation of the employees (or class of
employees) eligible for participation in this Plan; or
(c) constitute an amendment for which stockholder approval is
required by any stock exchange or automated quotation system upon which the
shares may then be listed.
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<PAGE> 1
EXHIBIT 10.03
INTUIT INC.
1996 DIRECTORS STOCK OPTION PLAN
As Adopted October 7, 1996
1. PURPOSE. This 1996 Directors Stock Option Plan (this "Plan") is
established to provide equity incentives for non-employee members of the Board
of Directors of Intuit Inc. (the "Company"), who are described in Section 6.1
below, by granting such persons options to purchase shares of stock of the
Company.
2. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective
on the date (the "Effective Date") on which it is adopted by the Board of
Directors of the Company (the "Board"). This Plan shall be approved by the
stockholders of the Company, consistent with applicable laws, within twelve (12)
months after the date this Plan is adopted by the Board. Options ("Options") may
be granted under this Plan after the Effective Date provided that, in the event
that stockholder approval is not obtained within the time period provided
herein, this Plan, and all Options granted hereunder, shall terminate. No Option
that is issued as a result of any increase in the number of shares authorized to
be issued under this Plan shall be exercised prior to the time such increase has
been approved by the stockholders of the Company and all such Options granted
pursuant to such increase shall similarly terminate if such stockholder approval
is not obtained.
3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan shall
be non-qualified stock options ("NQSOs"). The shares of stock that may be
purchased upon exercise of Options granted under this Plan (the "Shares") are
shares of the Common Stock of the Company.
4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan (the "Maximum Number") is 120,000
Shares, subject to adjustment as provided in this Plan. If any Option is
terminated for any reason without being exercised in whole or in part, the
Shares thereby released from such Option shall be available for purchase under
other Options subsequently granted under this Plan. At all times during the term
of this Plan, the Company shall reserve and keep available such number of Shares
as shall be required to satisfy the requirements of outstanding Options granted
under this Plan; provided, however, that if the aggregate number of Shares
subject to outstanding Options granted under this Plan plus the aggregate number
of Shares previously issued by the Company pursuant to the exercise of Options
granted under this Plan equals or exceeds the Maximum Number, then
notwithstanding anything herein to the contrary, no further Options may be
granted under this Plan until the Maximum Number is increased or the aggregate
number of Shares subject to outstanding Options granted under this Plan plus the
aggregate number of Shares previously issued by the Company pursuant to the
exercise of Options granted under this Plan is less than the Maximum Number.
5. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "Committee"). As used in this Plan, references to the Committee shall
mean either such Committee or the Board if no Committee has been established.
The interpretation by the Committee of any of the provisions of this Plan or any
Option granted under this Plan shall be final and binding upon the Company and
all persons having an interest in any Option or any Shares purchased pursuant to
an Option.
6. ELIGIBILITY AND AWARD FORMULA.
6.1 Eligibility. Options shall be granted only to directors of the
Company who are not employees of the Company or any Parent, Subsidiary or
Affiliate of the Company, as those terms are defined in Section 17 below (each
such person referred to as an "Optionee").
6.2 Initial Grant. Each Optionee who on or after the Effective Date
is or becomes a member of the Board will automatically be granted an Option for
15,000 Shares (the "Initial Grant") on the later of the date that
<PAGE> 2
Intuit Inc.
1996 Directors Stock Option Plan
the Plan is approved by the stockholders of the Company or the date such
Optionee first becomes a member of the Board.
6.3 Succeeding Grants. On each anniversary of an Initial Grant, if
the Optionee then is still a member of the Board and has served continuously as
a member of the Board since the date of the Optionee's Initial Grant, the
Optionee will automatically be granted an Option for 7,500 Shares (a "Succeeding
Grant").
7. TERMS AND CONDITIONS OF OPTIONS. Subject to the following and to
Section 6 above:
7.1 Form of Option Grant. Each Option granted under this Plan
shall be evidenced by a written Stock Option Grant ("Grant") in such form (which
need not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
7.2 Vesting. Options granted under this Plan shall be
exercisable as they vest. The date an Optionee receives an Initial Grant or a
Succeeding Grant is referred to in this Plan as the "Start Date" for such
Option. Each Initial Grant and Succeeding Grant will vest as to twenty-five
percent (25%) of the Shares upon the first anniversary of the Start Date for
such Grant and an additional 2.0833% of the Shares each month thereafter, so
long as the Optionee continuously remains a director or a consultant of the
Company, until the Option is exercisable with respect to 100% of the Shares.
7.3 Exercise Price. The exercise price of an Option shall be the
Fair Market Value (as defined in Section 17.4) of the Shares at the time that
the Option is granted.
7.4 Termination of Option. Except as provided below in this
Section, each Option shall expire ten (10) years after its Start Date (the
"Expiration Date"). The Option shall cease to vest and unvested Options shall
expire when the Optionee ceases to be a member of the Board or a consultant of
the Company. The date on which the Optionee ceases to be a member of the Board
or a consultant of the Company shall be referred to as the "Termination Date."
An Option may be exercised after the Termination Date only as set forth below:
(a) Termination Generally. If the Optionee ceases to be a
member of the Board or consultant of the Company for any reason except death or
disability, then each vested Option (as defined in Section 7.2 of this Plan)
then held by such Optionee may be exercised by the Optionee within seven (7)
months after the Termination Date, but in no event later than the Expiration
Date.
(b) Death or Disability. If the Optionee ceases to be a
member of the Board or consultant of the Company because of the death of the
Optionee or the disability of the Optionee within the meaning of Section
22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), then
each vested Option (as defined in Section 7.2 of this Plan) then held by such
Optionee may be exercised by the Optionee (or the Optionee's legal
representative) within twelve (12) months after the Termination Date, but in no
event later than the Expiration Date.
8. EXERCISE OF OPTIONS.
8.1 Exercise Period. Subject to the provisions of Section 8.5
below, Options shall be exercisable as they vest.
8.2 Notice. Options may be exercised only by delivery to the
Company of an exercise agreement in a form approved by the Committee stating the
number of Shares being purchased, the restrictions imposed on the Shares and
such representations and agreements regarding the Optionee's investment intent
and access to information as may be required by the Company to comply with
applicable securities laws, together with payment in full of the exercise price
for the number of Shares being purchased.
8.3 Payment. Payment for the Shares purchased upon exercise of
an Option may be made (a) in cash or by check; (b) by surrender of shares of
Common Stock of the Company that have been owned by the Optionee for more than
six (6) months (and which have been paid for within the meaning of Securities
and
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Intuit Inc.
1996 Stock Option Plan
Exchange Commission ("SEC") Rule 144 and, if such shares were purchased from
the Company by use of a promissory note, such note has been fully paid with
respect to such shares) or were obtained by the Optionee in the open public
market, having a Fair Market Value equal to the exercise price of the Option;
(c) by waiver of compensation due or accrued to the Optionee for services
rendered; (d) provided that a public market for the Company's stock exists,
through a "same day sale" commitment from the Optionee and a broker-dealer that
is a member of the National Association of Securities Dealers (an "NASD Dealer")
whereby the Optionee irrevocably elects to exercise the Option and to sell a
portion of the Shares so purchased to pay for the exercise price and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
exercise price directly to the Company; (e) provided that a public market for
the Company's stock exists, through a "margin" commitment from the Optionee and
an NASD Dealer whereby the Optionee irrevocably elects to exercise the Option
and to pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the exercise price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; or (f) by any combination of
the foregoing.
8.4 Withholding Taxes. Prior to issuance of the Shares upon
exercise of an Option, the Optionee shall pay or make adequate provision for any
federal or state withholding obligations of the Company, if applicable.
8.5 Limitations on Exercise. Notwithstanding the exercise
periods set forth in the Grant, exercise of an Option shall always be subject to
the following limitations:
(a) An Option shall not be exercisable until such time as
this Plan (or, in the case of Options granted pursuant to an amendment
increasing the number of shares that may be issued pursuant to this Plan, such
amendment) has been approved by the stockholders of the Company in accordance
with Section 15 below.
(b) An Option shall not be exercisable unless such
exercise is in compliance with the Securities Act of 1933, as amended (the
"Securities Act") and all applicable state securities laws, as they are in
effect on the date of exercise.
(c) The Committee may specify a reasonable minimum number
of Shares that may be purchased upon any exercise of an Option, provided that
such minimum number will not prevent the Optionee from exercising the full
number of Shares as to which the Option is then exercisable.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or by the Optionee's
guardian or legal representative, unless otherwise permitted by the Committee.
No Option may be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent and distribution.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a stockholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
of exercise, except as provided in this Plan. The Company shall provide to each
Optionee a copy of the annual financial statements of the Company, at such time
after the close of each fiscal year of the Company as they are released by the
Company to its stockholders.
11. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan and the number of Shares subject
to outstanding Options and the exercise price per share of such outstanding
Options shall be proportionately adjusted, subject to any required action by the
Board or stockholders of the Company and compliance with applicable securities
laws; provided, however, that no fractional shares shall be issued upon exercise
of any Option and any resulting fractions of a Share shall be rounded up to the
nearest whole Share.
12. NO OBLIGATION TO CONTINUE AS DIRECTOR. Nothing in this Plan or any
Option granted under this Plan shall confer on any Optionee any right to
continue as a director of the Company.
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Intuit Inc.
1996 Directors Stock Option Plan
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of
Shares upon exercise of any Options shall be subject to and conditioned upon
compliance with all applicable requirements of law, including without limitation
compliance with the Securities Act, compliance with all other applicable state
securities laws and compliance with the requirements of any stock exchange or
national market system on which the Shares may be listed. The Company shall be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration or qualification requirement of any state securities laws,
stock exchange or national market system.
14. ACCELERATION OF OPTIONS UPON CERTAIN CORPORATE TRANSACTIONS. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Options granted under this Plan are assumed or replaced by the
successor corporation, which assumption will be binding on all Optionees), (c) a
merger in which the Company is the surviving corporation but after which the
stockholders of the Company (other than any stockholder which merges (or which
owns or controls another corporation which merges) with the Company in such
merger) own less than 50% of the shares or other equity interests in the
Company, (d) the sale of substantially all of the assets of the Company, or (e)
the acquisition, sale or transfer of a majority of the outstanding shares of the
Company by tender offer or similar transaction, the vesting of all options
granted pursuant to this Plan will accelerate and the options will become
exercisable in full prior to the consummation of such event at such times and on
such conditions as the Committee determines, and if such options are not
exercised prior to the consummation of the corporate transaction, they shall
terminate in accordance with the provisions of this Plan.
15. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan (but may not terminate or amend the terms of any
outstanding option without the consent of the Optionee); provided, however, that
the Committee shall not, without the approval of the stockholders of the
Company, increase the total number of Shares available under this Plan (except
by operation of the provisions of Sections 4 and 11 above) or change the class
of persons eligible to receive Options. In any case, no amendment of this Plan
may adversely affect any then outstanding Options or any unexercised portions
thereof without the written consent of the Optionee.
16. TERM OF PLAN. Options may be granted pursuant to this Plan from
time to time within a period of ten (10) years from the Effective Date.
17. CERTAIN DEFINITIONS. As used in this Plan, the following terms
shall have the following meanings:
17.1 "Parent" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
17.2 "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
17.3 "Affiliate" means any corporation that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, another corporation, where "control" (including
the terms "controlled by" and "under common control with") means the possession,
direct or indirect, of the power to cause the direction of the management and
policies of the corporation, whether through the ownership of voting securities,
by contract or otherwise.
17.4 "Fair Market Value" means, as of any date, the value of a
share of the Company's Common Stock determined as follows:
-4-
<PAGE> 5
Intuit Inc.
1996 Directors Stock Option Plan
(a) if such Common Stock is then quoted on the Nasdaq
National Market, its last reported sale price on the
Nasdaq National Market or, if no such reported sale
takes place on such date, the average of the closing
bid and asked prices;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, its last
reported sale price or, if no such reported sale takes
place on such date, the average of the closing bid and
asked prices on the principal national securities
exchange on which the Common Stock is listed or
admitted to trading;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities exchange,
the average of the closing bid and asked prices on such
date, as reported in The Wall Street Journal, for the
over-the-counter market; or
(d) if none of the foregoing is applicable, by the
Committee in good faith.
-5-
<PAGE> 1
INTUIT INC. EXHIBIT 11.01
COMPUTATION OF NET INCOME PER SHARE
(in thousands, except per share amounts; unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
1996 1997 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY
Computation of common and common
equivalent shares outstanding:
Weighted average common shares
outstanding 45,023 46,391 44,850 46,220
Equivalent shares issuable upon exercise
of options 2,799 1,240 2,570 1,264
--------------------------------------------------------
Shares used in computing per share amounts 47,822 47,631 47,420 47,484
--------------------------------------------------------
Net income $ 21,910 $115,940 $ 1,588 $ 87,636
--------------------------------------------------------
Per share amount $ 0.46 $ 2.44 $ 0.03 $ 1.85
--------------------------------------------------------
FULLY-DILUTED
Computation of common and common
equivalent shares outstanding:
Weighted average common shares
outstanding 45,023 46,391 44,850 46,391
Equivalent shares issuable upon exercise
of options 2,799 1,240 2,852 1,093
--------------------------------------------------------
Shares used in computing per share amounts 47,822 47,631 47,702 47,484
--------------------------------------------------------
Net income $ 21,910 $115,940 $ 1,588 $ 87,636
--------------------------------------------------------
Per share amount $ 0.46 $ 2.44 $ 0.03 $ 1.85
--------------------------------------------------------
</TABLE>
-25-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<EXCHANGE-RATE> 1
<CASH> 104,859
<SECURITIES> 350,524
<RECEIVABLES> 152,213
<ALLOWANCES> (5,936)
<INVENTORY> 4,428
<CURRENT-ASSETS> 638,747
<PP&E> 137,129
<DEPRECIATION> (58,205)
<TOTAL-ASSETS> 751,920
<CURRENT-LIABILITIES> 330,590
<BONDS> 5,080
0
0
<COMMON> 465
<OTHER-SE> 413,078
<TOTAL-LIABILITY-AND-EQUITY> 751,920
<SALES> 265,978
<TOTAL-REVENUES> 265,978
<CGS> 58,621
<TOTAL-COSTS> 58,735
<OTHER-EXPENSES> 133,634
<LOSS-PROVISION> 2,887
<INTEREST-EXPENSE> 178
<INCOME-PRETAX> 75,367
<INCOME-TAX> 30,667
<INCOME-CONTINUING> 44,700
<DISCONTINUED> 71,240
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115,940
<EPS-PRIMARY> 2.44
<EPS-DILUTED> 2.44
</TABLE>
